Question

Of the following statements, which are true for the corporate form of organization?

1. Ownership rights cannot be easily transferred.

2. Owners have unlimited liability for corporate debts.

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

4. Corporate income that is distributed to shareholders is usually taxed twice.

5. It is a separate legal entity.

6. It has a limited life.

7. Owners are not agents of the corporation.

Short answer

(1) False

(2) False

(3) True

(4) True

(5) True

(6) False

(7) True

Step-by-step solution

Ownership rights cannot be easily transferred.

As when stock are get transferred related ownership rights will get transfer easily.

Step 2:Owners have unlimited liability for corporate debts.

As owners and corporations are separate, owners will not have any liability of corporation actions.

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

Stocks attracts investors because of advantages like no liability for corporation actions, capital appreciation in stock, dividend, easily transferable etc.,

Step 4:Corporate income that is distributed to shareholders is usually taxed twice

Generally corporation declare tax out of tax paid funds. When owner are received such funds, they need to pay tax personally for that income.

Step 5:It is a separate legal entity

A corporation is an entity that is separate from its owners. It Forms as separate legal entity having right and obligations.

It has a limited life

A corporation’s life continues indefinitely as it formed as separate legal entity.

Owners are not agents of the corporation.

Stockholders are not required to bind the corporation contracts / actions.