Companies are a separate legal entity independent of its owners. Which of the following is NOT a disadvantage of this separation?Group of answer choicesA company must pay income tax on its taxable income.The company’s shares can only be sold on organised stock markets like the ASX.Companies may find it more difficult to borrow money because the owners have limited liability.Companies are subject to more government regulation.
Question
Companies are a separate legal entity independent of its owners. Which of the following is NOT a disadvantage of this separation?Group of answer choicesA company must pay income tax on its taxable income.The company’s shares can only be sold on organised stock markets like the ASX.Companies may find it more difficult to borrow money because the owners have limited liability.Companies are subject to more government regulation.
Solution
The statement "The company’s shares can only be sold on organised stock markets like the ASX" is NOT a disadvantage of the separation between a company and its owners. This is because being able to sell shares on organized stock markets can actually be an advantage as it can provide companies with access to a larger pool of potential investors, thereby increasing their ability to raise capital.
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