Which of the following statements reflects a characteristic of corporations? a. There is mutual agency for the stockholders, meaning that the stockholders have the power to bind the corporation to contracts.

Which of the following statements reflects a characteristic of corporations?

a. There is mutual agency for the stockholders, meaning that the stockholders have the power to bind the corporation to contracts.

b. A corporation has a limited life, which means if a stockholder dies or sells the stock it owns, then a new corporate charter must be submitted.

c. The stockholders have unlimited liability and therefore are ultimately responsible for the corporation's debts.

d. The corporation is a separate legal entity and therefore pays income taxes.

Solutions

Expert Solution

The correct answer is option d.

The corporation is a separate legal entity and therefore pays income taxes.

To answer the above problem, let us discuss each of the choices above.

Option a. is incorrect. A corporation is a type of business organization that is considered separate and apart from that of the stockholders. Any contracts are entered between the corporation and other parties, not by the stockholders.

Option b. is incorrect. A corporation has a limited life. However, a corporate charter does not need to be revised if one of the stockholders dies.

Option c. is incorrect. In case of bankruptcy, the stockholders are responsible for the debt of the company limited only to the total shares he/she owned in the latter.

Option d. is the correct answer. A corporation is considered a juridical person. It is considered a legal entity that is separate from the corporators and stockholders.

The correct answer is option d.

Junaid answered 1 year ago

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