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Multiple Choice
Which of the following is NOT considered to be an advantage of a corporation?
A
Continuous existence regardless of ownership changes
B
Ability to raise large amounts of capital
C
Double taxation of earnings
D
Limited liability for shareholders
Verified step by step guidance
1
Step 1: 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, such as entering contracts, owning assets, and being liable for debts.
Step 2: Review the advantages of a corporation. Common advantages include continuous existence regardless of ownership changes, the ability to raise large amounts of capital, and limited liability for shareholders. These features make corporations attractive for business operations.
Step 3: Examine the concept of double taxation. Double taxation occurs when a corporation's earnings are taxed at the corporate level and then taxed again when distributed as dividends to shareholders. This is considered a disadvantage of corporations.
Step 4: Compare the options provided in the question. Identify which features are advantages (continuous existence, ability to raise capital, limited liability) and which feature is a disadvantage (double taxation).
Step 5: Conclude that the correct answer is 'Double taxation of earnings,' as it is not an advantage but rather a disadvantage of a corporation.