Question

The main advantage that corporations have is

Answer 1

The first alternative is correct (A).

Large corporations are publicly traded, meaning that the company is divided into shares that are distributed in the financial market to investors. These investors, in turn, delegate a team of directors who make strategic decisions of the firm, theoretically independent. However, the directors make their decisions thinking about the profit that will pass to the owners of the companies' shares, to which they report.

This model, in a way, places the responsibility of business owners in the background. In the event of a lawsuit, the company is first investigated as well as its directors. In order to reach the owners, a more complex legal process is necessary.

A recent example: a mining company caused an environmental and human catastrophe in Brazil, destroying an ecosystem and killing hundreds of people. The shareholders were not held responsible, only the company as an institution is being processed. The board was fired, but the real owners of the company suffered nothing.

Answer 2

Option A is correct.

The main advantage that corporations have is limiting liability for owners and stockholders.

Further Explanation:

The advantages of the Corporations are:

• Limited liability

• Ownership can be transferred easily

• Perpetual life

• Separate legal entity

Justification for correct and incorrect answer:

A.  

Limiting liability for owners and stockholders: This option is correct.

The corporations have limited liability means that the liability of the owner and stockholder is limited to the unpaid value of shares held by them or the amount they guarantee to contribute at the time of winding up.

B.  

Giving many owners a say in business decisions: This option is incorrect.

The owners of the corporations are a shareholder but the management of the corporation is entrusted to the Board of directors. The shareholders have voting rights but majority of the decisions are taken by directors.

C.  

Being inexpensive and easy to establish: This option is incorrect.

The formation of the corporation involves compliance with various laws and also involves payment of the the fee in order to register the company.

D.  

Requiring fewer state and federal regulations: This option is incorrect.

The corporation is subjected to various laws and regulations like United States Corporate Law, Securities and Exchange Act and other tax laws.

Learn more:

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Answer details:

Grade: High School

Subject: Business Studies

Chapter: Forms of business organisation

Keywords:The main advantage that corporations have, limiting liability for owners and stockholders, Giving many owners a say in business decisions, Being inexpensive and easy to establish, Requiring fewer state and federal regulations .