Answer to Question #5856 in Finance for LaMarcus Streeter

Question

Financial Management (Explain how answer was reached)
1. Which of the following statements is CORRECT?

a. One of the disadvantages of a sole proprietorship is that the proprietor is exposed to unlimited liability.
b. It is generally easier to transfer one’s ownership interest in a partnership than in a corporation.

c. One of the advantages of the corporate form of organization is that it avoids double taxation.

d. One of the advantages of a corporation from a social standpoint is that every stockholder has equal voting rights, i.e., “one person, one vote.”

e. Corporations of all types are subject to the corporate income tax.

Answer 1

One of the disadvantages of a sole proprietorship is that the proprietor is exposed to unlimited liability is TRUE statement because unlimited liability
means in this case the responsibility of sole proprietor to meet its obligations to all its own property, including a personal fortune. If the business goes bankrupt the proprietor will lose its wealth.