Which of the following is NOT considered to be an advantage of a corporation?

• A. Double taxation of profits
• B. Perpetual existence
• C. Limited liability for owners
• D. Ability to raise large amounts of capital

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the concept of a corporation and its typical advantages. A corporation is a legal entity separate from its owners, which provides certain benefits such as limited liability, perpetual existence, and the ability to raise capital.
2. Step 2: Review the meaning of 'limited liability for owners.' This means that shareholders are only responsible for the corporation's debts up to the amount they invested, protecting their personal assets.
3. Step 3: Consider 'perpetual existence,' which means the corporation continues to exist even if ownership or management changes, unlike sole proprietorships or partnerships.
4. Step 4: Analyze the 'ability to raise large amounts of capital.' Corporations can issue stocks and bonds, making it easier to gather funds from many investors.
5. Step 5: Recognize that 'double taxation of profits' refers to the fact that corporate profits are taxed at the corporate level and again at the shareholder level when dividends are distributed. This is generally considered a disadvantage, not an advantage, of corporations.