Asked by Cydney Adger on May 14, 2024
Verified
Which of the following is a disadvantage of a corporation compared to a sole proprietorship?
A) Limited liability
B) Difficulty raising start-up money
C) Lack of profitability
D) Double taxation of corporate income
E) Vulnerability in the case of the death of an owner
Double Taxation
The imposition of two or more taxes on the same income, asset, or financial transaction.
Corporation
A legal entity that is distinct from its owners, offering limited liability and the ability to raise capital by selling shares.
Sole Proprietorship
A type of enterprise owned and operated by one person, where there is no legal distinction between the owner and the business operation.
- Know the disadvantages and challenges faced by corporations compared to sole proprietorships.
Verified Answer
NA
NOOR AZLINA ABDULLAHMay 16, 2024
Final Answer :
D
Explanation :
One of the biggest disadvantages of a corporation compared to a sole proprietorship is double taxation of corporate income. The corporation first pays taxes on its profits, and then shareholders pay taxes on any dividends they receive from those profits. This can result in a higher overall tax burden for the company and its owners. Limited liability, difficulty raising start-up money, lack of profitability, and vulnerability in the case of the death of an owner are all potential disadvantages of a sole proprietorship.
Learning Objectives
- Know the disadvantages and challenges faced by corporations compared to sole proprietorships.