Which of the following is a disadvantage of corporations?

• A. Limited life span
• B. Difficulty in raising capital
• C. Unlimited liability for owners
• D. Double taxation of profits

Answer: (D)

Verified step by step guidance

1. Understand the characteristics of different business organizations: sole proprietorships, partnerships, and corporations.
2. Recall that corporations have a separate legal identity, which provides limited liability to their owners (shareholders), meaning owners are not personally liable for business debts.
3. Recognize that corporations generally have an unlimited life span because ownership can be transferred through shares without affecting the corporation's existence.
4. Note that corporations typically find it easier to raise capital by issuing stocks and bonds compared to other business forms.
5. Identify that a key disadvantage of corporations is double taxation: the corporation's profits are taxed at the corporate level, and then dividends distributed to shareholders are taxed again at the individual level.