Introductory Business Law CLEP Prep Practice Exam

Disable ads (and more) with a membership for a one time $2.99 payment

Prepare for the CLEP Business Law Exam with flashcards and multiple-choice questions. Each question comes with hints and explanations to help you succeed. Master the content and pass your exam!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.


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.