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Homework answers / question archive / Of the following statements, which are true for the corporate form of organization? 1

Of the following statements, which are true for the corporate form of organization? 1

Business

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.

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Characteristics of the corporate form of organization:

1. Ownership rights cannot be easily transferred - false

Under a corporate form of organization, owners own shares in the capital contribution. These shares can be purchased or sold at the owner's will, with some legal formalities.

Transfer of shares from one investor to the other transfers the ownership rights as well.

2. Owners have unlimited liability for corporate debtsfalse

One of the major incentives for business doers to form a corporation is that the liability is limited to their share of investment. Any liability is limited solely to the assets & property of the organization and does not fall over the individual owners.

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

In companies or corporates, capital can be raised either by issuing fresh shares to the new investors or by issuing bonds in the market. It is much easier to accumulate capital than a sole proprietor or partnership business.

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

When the corporations earn income, they are liable to pay taxes on the earnings. When these earnings are distributed as dividends to the investors, it is again taxed in the hands of investors. Hence, distribution to shareholders is taxed twice in the corporate type of organization.

5. It is a separate legal entity. - true

A corporation or company is a separate legal entity. It has all the rights and responsibilities of a person and is treated as a legal separate identity person in the eyes of law and otherwise.

6. It has a limited life.- false

Owners may come and go but the company remains in existence always. This defines the life of the company. It is true that the company remains, even though all its owners change. In contrast, if all the owners decided to close the company, they may do so following certain required rules and regulations.

7. Owners are not agents of the corporation. - true

Owners are the principal of the corporation. They are the ones who own the company. They hire bodies such as the board of directors and managerial personnel to carry out the activities of the corporation. Hence these bodies hired by the owners are the agents of the corporation. They are responsible for the fiduciary duties of the corporation.