The major characteristics of a corporation are as follows:

Separate legal existence Limited liability of shareholders Transferable ownerships rights Ability to acquire capital Continuous life Government regulations Corporate income tax

The following items pertain to one of the characteristics of the corporate form of organization. For each item below, identify:

(a) whether it represents an advantage or disadvantage, and (b) the characteristic that pertains to the item. (Note: a characteristic can be used more than once.)

(a) Advantage / Disadvantage (b) Characteristics 1. A corporation can continue to operate even if all of its shareholders have been replaced Disadvantage Advantage Limited liability of shareholders Transferable ownerships rights Government regulations Corporate income tax Ability to acquire capital Separate legal existence Continuous life 2. A corporation is a going concern Disadvantage Advantage Transferable ownerships rights Corporate income tax Government regulations Separate legal existence Limited liability of shareholders Ability to acquire capital Continuous life 3. Buying shares is an attractive way for individuals to invest in a company because the cash requirement is often very small Advantage Disadvantage Corporate income tax Limited liability of shareholders Continuous life Separate legal existence Government regulations Transferable ownerships rights Ability to acquire capital 4. Corporations issue shares in order to obtain capital (cash) Advantage Disadvantage Separate legal existence Limited liability of shareholders Transferable ownerships rights Corporate income tax Ability to acquire capital Continuous life Government regulations 5. In private corporations, creditors may demand a personal guarantee from a controlling shareholder Disadvantage Advantage Continuous life Separate legal existence Limited liability of shareholders Government regulations Corporate income tax Transferable ownerships rights Ability to acquire capital 6. Laws specify the requirements for issuing shares, distributing income to shareholders, and reacquiring shares Disadvantage Advantage Transferable ownerships rights Government regulations Ability to acquire capital Separate legal existence Limited liability of shareholders Continuous life Corporate income tax 7. No journal entry is required if a shareholder sells his or her shares to another investor Disadvantage Advantage Corporate income tax Separate legal existence Ability to acquire capital Limited liability of shareholders Continuous life Government regulations Transferable ownerships rights 8. Respecting international, federal, provincial, and securities rules increases costs and complexity for corporations Advantage Disadvantage Transferable ownerships rights Ability to acquire capital Separate legal existence Corporate income tax Continuous life Government regulations Limited liability of shareholders 9. Shareholders cannot be made to pay for the company's liabilities out of their personal assets Advantage Disadvantage Ability to acquire capital Limited liability of shareholders Transferable ownerships rights Separate legal existence Continuous life Government regulations Corporate income tax 10. Shareholders may dispose of their interest in a corporation simply by selling their shares Advantage Disadvantage Limited liability of shareholders Government regulations Separate legal existence Continuous life Corporate income tax Transferable ownerships rights Ability to acquire capital 11. Shareholders only pay income tax on corporation profits when they receive dividends Advantage Disadvantage Transferable ownerships rights Continuous life Ability to acquire capital Government regulations Limited liability of shareholders Separate legal existence Corporate income tax 12. The corporation acts under its own name Disadvantage Advantage Continuous life Limited liability of shareholders Transferable ownerships rights Ability to acquire capital Government regulations Corporate income tax Separate legal existence 13. The corporation may buy, own and sell property Disadvantage Advantage Transferable ownerships rights Government regulations Separate legal existence Corporate income tax Ability to acquire capital Limited liability of shareholders Continuous life 14. The liability of each shareholder is limited to the amount invested in the shares of the corporation Advantage Disadvantage Continuous life Ability to acquire capital Separate legal existence Limited liability of shareholders Transferable ownerships rights Government regulations Corporate income tax 15. The sale of shares from one individual to another does not affect the corporation assets, liabilities, and total equity Advantage Disadvantage Separate legal existence Transferable ownerships rights Continuous life Government regulations Corporate income tax Limited liability of shareholders Ability to acquire capital