Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

12. Stockholders' Equity

Characteristics of a Corporation

Financial Accounting

12. Stockholders' Equity

Characteristics of a Corporation

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Multiple Choice

Which of the following is an attractive benefit of forming a corporation?

Unlimited personal liability for owners

Ownership restricted to a single individual

Limited liability for shareholders

Exemption from all federal taxes

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Verified step by step guidance

Understand the concept of a corporation: A corporation is a legal entity that is separate from its owners (shareholders). It has its own rights and responsibilities, including the ability to enter into contracts, own assets, and incur liabilities.

Review the concept of limited liability: Limited liability means that shareholders are not personally responsible for the corporation's debts or liabilities. Their financial risk is limited to the amount they have invested in the corporation.

Compare the options provided: Analyze each option to determine which aligns with the characteristics of a corporation. For example, unlimited personal liability for owners is a feature of sole proprietorships or partnerships, not corporations.

Focus on the correct answer: Limited liability for shareholders is a key benefit of forming a corporation. This feature protects shareholders' personal assets from being used to settle corporate debts.

Eliminate incorrect options: Ownership restricted to a single individual and exemption from all federal taxes are not characteristics of corporations. Corporations can have multiple shareholders, and they are subject to federal taxes.