Introductory Business Law CLEP Prep Practice Exam

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Prepare for the Introductory Business Law CLEP Exam with our comprehensive quiz, designed to cover essential legal concepts and practices. Study effectively and boost your chances of success!

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What is a primary advantage of forming a corporation?

  1. Limited liability

  2. Lower tax rate

  3. Preferred stock

  4. Dividend distribution

The correct answer is: Limited liability

A primary advantage of forming a corporation is that it offers limited liability to its owners. This means that the personal assets of the shareholders are protected from the debts and liabilities of the corporation. As for the other options, lower tax rate and dividend distribution are not exclusive to corporations and can be applicable to other business entities. Preferred stock may provide certain benefits, but it does not apply to all corporations and is not the main advantage of forming one.

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