CFA Level I · CFA Level I Exam · Organizational Forms, Corporate Issuer Features, and Ownership
Compared with a sole proprietorship, a corporation is most likely to offer an advantage in:
A corporation most likely has an advantage in raising large amounts of capital from many investors, because it can issue shares and benefits from limited liability and transferable ownership. Double taxation and higher formation and reporting costs are disadvantages compared with a sole proprietorship.
- Aavoiding double taxation of earnings
- Bsimpler and cheaper formation and reporting
- Craising large amounts of capital from many investorsCorrect
Explanation
Corporations can issue shares to many investors and so raise large capital, and they have limited liability and perpetual life. They face double taxation and heavier formation and reporting costs, which are disadvantages relative to a sole proprietorship.
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