Problem 1.

What is the most important difference between a corporation and all other
organizational forms?

A: The important difference between the types of organizational forms is the way
they are taxed. Shareholders of a corporation pay taxes twice. The corporation pays
tax on its profits, and after distributing the profits to the shareholders, they pay their
own personal income tax on this income.
The corporation is a legally defined, artificial being separate from its owners, which
means it’s a legal entity that has legal powers that people have. Therefore,
corporations have limited liability while other business organizations such as sole
proprietorships have unlimited liability, which means that a corporation is a legal
entity separate and distinct from its owners.

Problem 2
What does the phrase limited liability mean in a corporate context?

A: Limited liability means the owners’ liability is limited to their investment, they are
not responsible for any encumbrances of the firm and cannot be required to pay
back any debts incurred by the firm.

Problem3
Which organizational forms give their owners limited liability ?

A: Corporations and limited liability companies give owners limited liability. Limited
partnerships provide limited liability for the limited partners, but not for the general
partners. Corporations is a legal entity that have limited liability and separate from its
owner.