Which of the Following Is a Disadvantage Associated with a Corporation

question 47

Multiple Choice

Which of the following is a disadvantage associated with a corporation?

• A) taxation rates compared to those of a sole proprietorship
• B) cost of formation compared to a partnership
• C) unlimited liability
• D) limited life

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Definitions:

Notes Payable

A liability represented by a written promise to pay a specific sum of money, usually with interest, by a specified date.

Equipment

comprises tangible assets used in operations, such as machinery and office hardware, which have a useful life beyond one year and assist in the production of goods and services.

AASB 132

Refers to the Australian Accounting Standards Board standard on Financial Instruments: Presentation, which covers the presentation of financial instruments in financial statements.

Financial Liability

Any liability that is a contractual obligation to deliver cash or another financial asset to another entity, or to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavourable to the entity; or a contract that may be settled in the entity’s own equity instruments and is a non-derivative for which the entity may be obliged to deliver a variable number of the entity’s own equity instruments, or a derivative that may be settled other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of the entity’s own equity instruments. For this purpose, rights, options, or warrants to acquire a fixed number of the entity’s own equity instruments for a fixed amount of any currency are equity instruments if the entity offers the rights, options, or warrants pro rata to all of its existing owners of the same class of its own non-derivative equity instruments.