Which of the Following Statements Is CORRECT

question 28

Multiple Choice

Which of the following statements is CORRECT?

• A) It is generally more expensive to form a proprietorship than a corporation because, with a proprietorship, extensive legal documents are required.
• B) Corporations face fewer regulations than sole proprietorships.
• C) One disadvantage of operating a business as a sole proprietorship is that the firm is subject to double taxation, at both the firm level and the owner level.
• D) One advantage of forming a corporation is that equity investors are usually exposed to less liability than in a regular partnership.
• E) If a regular partnership goes bankrupt, each partner is exposed to liabilities only up to the amount of his or her investment in the business.

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Definitions:

Owns

The act of having legal possession or right to an asset or property.

Variable Interest Entity

A variable interest entity is a legal entity in which an investor holds a controlling interest that is not based on the majority of voting rights, leading to complex consolidation rules.

Consolidated Statements

Financial reports that aggregate the financial position and operating results of a parent company and its subsidiaries, showing the financial health and performance of the entire corporate group as a single entity.

Controlling Financial Interest

Refers to the possession of enough voting interest in a company to dictate its financial and operating policies.