Due to recent beef recalls, Southwest Steakhouse is considering incorporating. B
ID: 2487473 • Letter: D
Question
Due to recent beef recalls, Southwest Steakhouse is considering incorporating. Bob, the owner, wants to protect his personal assets in the event the restaurant is sued.
1.First answer which advantage of incorporating is most applicable in protecting Bob's personal assets? A. A corporation has continuous life. B. There is a mutual agency among the stockholders. C. Corporations can raise more money to pay for government regulations. D. The transfer of corporate ownership is easy. E. Stockholders have limited liability.
2.What are other advantages of organizing as a corporate entity? (Select three that apply.) A. A corporation has continuous life. B. Start-up costs are lower than other business forms. C. The corporation is taxed separately from the shareholders. D. A majority vote is all that is required for any business decision. E. All income and expenses are split evenly among the shareholders. F. It does not allow stockholders to bind the business to a contract. G. There is no mutual agency among the stockholders and the corporation
3.
What are some disadvantages of organizing as a corporation? (Select three that apply.)
A.
Start-up costs are higher than other business forms.
B.
Stockholders have limited liability.
C.
The transfer of corporate ownership is easy.
D.
Earnings of the corporation are subject to double taxation.
E.
Ownership and management are often separated.
F.
Corporations can raise more money than a proprietorship or partnership.
G.
It has an indefinite life.
Explanation / Answer
1. A. A corporation has continuous life
Corporations are the most enduring legal business structure. A corporation can continue indefinitely, regardless of what happens to its individual directors, officers, managers, or shareholders. This means that by incorporating your business, you may be able to avoid the legal entanglements that could result with other business structures.
2.A. A corporation has continuous life.
C. The corporation is taxed separately from the shareholders.
D. A majority vote is all that is required for any business decision.
3.A. Start-up costs are higher than other business forms.
B. Stockholders have limited liability.
D. Earnings of the corporation are subject to double taxation.
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