The Owner of a Proprietorship Might Decide Incorporate the Firm

question 138

Multiple Choice

The owner of a proprietorship might decide incorporate the firm as a corporation in order to

• A) be able to conduct business in more than one county.
• B) avoid the principal-agent problem.
• C) be eligible for patent protection of new products.
• D) gain limited liability.

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Definitions:

Due Diligence

The comprehensive investigation or exercise of care that a reasonable business or person is expected to undertake before entering into an agreement or transaction.

Gross Misstatements

Significant errors or falsehoods in a financial statement or other crucial documents.

Reasonable Investigation

A diligent inquiry or examination to discover facts or gather evidence, conducted within the bounds of what is considered reasonable under the circumstances.

Sarbanes-Oxley Act

A U.S. federal law enacted to protect investors by improving the accuracy and reliability of corporate disclosures.