1
Chapter 1
The Corporation
1-1. What is the most important difference between a corporation and all other organizational
forms?
1-2. What does the phrase limited liability mean in a corporate context?
1-3. Which organizational forms give their owners limited liability?
1-4. What are the main advantages and disadvantages of organizing a firm as a corporation?
1-5. Explain the difference between an S corporation and a C corporation.
1-6. You are a shareholder in a C corporation. The corporation earns $2 per share before taxes. Once
it has paid taxes it will distribute the rest of its earnings to you as a dividend. The corporate tax
rate is 40% and the personal tax rate on (both dividend and non-dividend) income is 30%. How
much is left for you after all taxes are paid?
1-7. Repeat Problem 6 assuming the corporation is an S corporation.
