Florida General Contractor Practice Exam

What is one advantage of a regular corporation?

1. Unlimited personal liability for shareholders

2. Ease of raising capital through stock sales

3. Less regulatory oversight compared to sole proprietorships

4. Immediate tax benefits upon formation

The correct answer is: Ease of raising capital through stock sales

Raising capital through stock sales is a significant advantage of a regular corporation. As a corporation can issue shares of stock, it is able to attract investors who want to purchase these shares as a means of investing in the company's future growth. This ability to offer equity stakes enables corporations to gather substantial funds, which can be used for expansion, operations, and other business needs. Furthermore, the structure of a corporation provides a level of credibility and stability that may encourage more investors to contribute capital compared to other business forms. This capacity to effectively raise capital is vital for business growth and pursuing opportunities that may not otherwise be available with limited funding sources. In contrast, the other options present disadvantages or different contexts that do not apply to a regular corporation's strengths in capital formation. For example, unlimited personal liability pertains to sole proprietorships and partnerships rather than corporations, where shareholders enjoy limited liability. Additionally, regulatory oversight tends to be more extensive for corporations compared to other forms of business, like sole proprietorships, and immediate tax benefits are typically more associated with specific tax strategies rather than a general characteristic of corporations.