Companies are a separate legal entity independent of its owners. Which of the following is NOT a disadvantage of this separation?

Question

BlackTom AI · Accepted Answer

To begin, restating what we have: the question asks which statement is NOT a disadvantage of a company being a separate legal entity from its owners, and the provided answer option is:
- The company’s shares can only be sold on organised stock markets like the ASX.

Now, without additional answer options to compare, we can still analyze this single statement.

Option analysis:
- The claim that shares can only be sold on organised stock markets (e.g., ASX) implies a limitation on liquidity and transferability. In practice, shares of a company can often be sold on public stock exchanges, and in many cases they can also be transferred privately or negotiated directly between parties, depending on the company’s structure and regulatory requirements. If the statement were true, it would describe a restriction on how shares trade, which would indeed be a disadvantage because it reduces flexibility for shareholders and can limit liquidity.
- Therefore, this option tends to describe a disadvantage (a restriction on trade/sales), not something that is NOT a disadvantage. If we take it at face value, it contradicts the idea that separation creates no drawback in terms of transferability and liquidity. In other words, the statement is not aligned with the typical non-disadvantage nature of the separation and appears to present a constraint rather than a benefit.

Because there are no other answer choices provided for comparison, we cannot evaluate which option would truly be NOT a disadvantage among multiple alternatives. If we assume the single option to be evaluated, the interpretation hinges on whether the statement is accurate in typical practice: shares can be sold on exchanges and/or privately, so stating they can only be sold on organized markets is not universally true and would generally be considered a limitation rather than a benefit. Consequently, this option is not clearly a NOT-a-disadvantage statement; it describes a condition that would itself be a disadvantage if it were strictly true.

Additional context: commonly discussed advantages of a separate legal entity include limited liability for owners, perpetual existence, and ease of raising capital; typical disadvantages include double taxation (in some jurisdictions), compliance costs, agency problems, and potential loss of control. The given option does not cleanly illustrate a standard NOT-a-disadvantage scenario in this framework.

In summary, with only this option available, the statement describes a potential limitation (restricted liquidity/transferability) that would normally be viewed as a disadvantage, not a NOT-a-disadvantage. The absence of other options makes it impossible to identify a clear NOT-a-disadvantage choice from the list provided.

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Companies are a separate legal entity independent of its owners. Which of the following is NOT a disadvantage of this separation?

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BUSS1030 (ND) Early Feedback Task

Companies are a separate legal entity independent of its owners. Which of the following is NOT a disadvantage of this separation?

View Explanation

Log in for full answers

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