Chapter 13, Problem 1QS

To determine

Concept Introduction:

The Corporate form of organization:

There are several forms of business organizations like proprietorship, partnership, limited liability partnership, Corporation etc. The Corporate form is the most complicated and wider form of business organization. It creates a separate legal identity of the business and allows the business to raise funds through public issue.

Characteristic of a corporation are as follows:

• Separate legal entity: The Corporate form of business has its own legal identity and owners are personally liable for the debt of the corporation.

• Easy availability of funds: As compared with other business form, a corporate form of business can easily raise find by making public issues of its shares.

• Separate taxability: The Corporate form of business has its own legal identity and hence it is separately taxed. Hence owners are not liable for the tax liability of the company.

• Limited liability of shareholders: Shareholders or owners of the company have limited liability. They are not personally liable for the debts of the company.

• Easy transfer of ownership: In the case of a company the ownership is transferred only by the transferring the shares of the company.

To identify:

The true statements about Characteristic of a corporate form of organization

Explanation of Solution

The true statements about Characteristic of a corporate form of organization are following:

1. Ownership rights cannot be easily transferred.

4. Corporate income that is usually taxed twice.

5. It is a separate legal entity.

7. Owners are not agents of the corporation

Following other statements are false for the corporate form of organization:

2. Owners have unlimited liability for corporate debts.

3. Capital is more easily accumulated than with most other forms of organization

6. It has a limited life.