What is an advantage of a corporation?

What is an advantage of a corporation?

• A. Unlimited liability
• B. Centralized management
• C. Limited liability
• D. Continuous existence

Answer: (C)

Limited liability is a key advantage of a corporation. This concept means that the personal assets of the shareholders are protected from the corporation's debts and liabilities. If the corporation faces lawsuits or financial difficulties, the shareholders’ financial risk is limited to their investment in the company. This structure encourages individuals to invest in businesses without the fear of losing personal property or assets beyond their initial investment, thus fostering entrepreneurship and economic growth. Furthermore, this protection is crucial in attracting investors who may be hesitant to invest in a business without such a safeguard. With the assurance that their personal wealth is not at risk, more people are likely to engage in corporate ownership, ultimately promoting business expansion and innovation. Centralized management and continuous existence are also significant features of corporations, but limited liability is particularly compelling as it directly addresses financial risk associated with business ownership, making it a decisive factor in favor of choosing a corporate structure.

Limited liability is a key advantage of a corporation. This concept means that the personal assets of the shareholders are protected from the corporation's debts and liabilities. If the corporation faces lawsuits or financial difficulties, the shareholders’ financial risk is limited to their investment in the company. This structure encourages individuals to invest in businesses without the fear of losing personal property or assets beyond their initial investment, thus fostering entrepreneurship and economic growth.

Furthermore, this protection is crucial in attracting investors who may be hesitant to invest in a business without such a safeguard. With the assurance that their personal wealth is not at risk, more people are likely to engage in corporate ownership, ultimately promoting business expansion and innovation.

Centralized management and continuous existence are also significant features of corporations, but limited liability is particularly compelling as it directly addresses financial risk associated with business ownership, making it a decisive factor in favor of choosing a corporate structure.