Which of the following is not a characteristic of a corporation?

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BlackTom AI · Accepted Answer

Question restatement: Which of the following is not a characteristic of a corporation?

Option 1: 'Ownership is divided into shares of stock.' This is a hallmark of corporate structure: ownership is indeed represented by stock certificates, allowing for fractional or shared ownership and easy transferability. So, this option describes a genuine characteristic.

Option 2: 'A corporation’s resources are limited to its individual owners’ resources.' This claim is inaccurate for a corporation. One of the key advantages of incorporating is the ability to raise capital beyond the resources of a single owner or a few individuals, by issuing stock to a wider base of investors. Therefore, this statement mischaracterizes how corporations access resources and is not a feature of corporations.

Option 3: 'Corporations are organized as a separate legal taxable entity.' This statement is essentially correct, as corporations are recognized as separate legal entities from their owners, and they are subject to corporate taxation in many jurisdictions. The phrasing may vary (some places treat as taxable entities with distinct tax rules), but the core idea stands as a characteristic.

Option 4: 'Corporations experience an ease in obtaining large amounts of resources by issuing stock.' This describes a fundamental advantage of the corporate form: ability to raise substantial capital by issuing stock to investors, facilitating large-scale financing. Hence, this is a true characteristic.

Summary of reasoning: The second option makes a claim about resource limitations tied to individual owners, which contradicts the core advantage of corporations—access to large-scale capital through stock issuance. The other statements align with recognized features of corporations, such as stock-based ownership, separate legal status, and the capacity to attract substantial resources via stock issuance. Therefore, the statement in Option 2 is the one that does not describe a characteristic of a corporation.

Which of the following is not a characteristic of a corporation?

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