Question

Which of the following statement is true? a. A corporation is a legal entity separate from its owners. b. Reporting procedures are the same for private and public corporations. c. A limited liability company is only a corporation for professionals such as lawyers and accountants. d. Corporations can be either public or non for profit e. None of the statements are true

Answer 1

Correct Answer A.

Explaination:

A) According to Business Entitiy concept which is included in Generally Accepted Accounting Principles (GAAP) that Business/Firm/corporation/company is considered as seperate legal entity from the owner of the company. According to business entity concepts, all those transaction which are related with the business must be recorded seperately. It does not include transactions associated with owner or other business entity. Hence, It is true.

B) Public companies are required to follow the rules and regulations to maintain the compliance with the U.S. Securities and Exchange Commission. Public companies need to file the quarterly financial reports, annual reports and other disclosure documents. On the other hand, private companies has less obligations regarding disclosures and developing the reports.

C) Limited liability company or partnership having a limited liabilities on each partner of the firm. In other words, each partner may not be liable for another partner's misconduct or negliegence. Lawyers and Accountants does not include LLP as these professions are required to do business through an unlimited liability entity and these are type of professional corporations.

D) This statement is false. As Corporations are of several types such as public company, S and C corporations, Regular Corporation, Statutory Close Corporation, Quasi-closed Corporation, Professional Corporation and Non-profit Corporation.