Question
A business becoming incorporated is an example of risk
A. severance
B. retention
C.
D.
A. severance
B. retention
C.
D.
Ask by Pritchard Bates. in the United States
Mar 26,2025
Upstudy AI Solution
Tutor-Verified Answer
Answer
Incorporating a business is an example of risk transfer.
Solution
Incorporating a business is primarily a strategy to limit personal liability and manage risk. This action typically falls under the category of risk transfer, as the business structure allows for the separation of personal assets from business liabilities.
Thus, the correct answer is:
D.
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Simplify this solution Mind Expander
When a business incorporates, it is transferring its risk. By incorporating, the owners (shareholders) limit their personal liability for the company’s debts and obligations. This separation means that if the business faces financial trouble, the personal assets of the shareholders are generally protected, which is a major incentive for entrepreneurs to choose incorporation. So, the answer is D.
Incorporating can also open new doors for businesses, including the ability to raise capital through the sale of stocks and increased credibility with potential clients and partners. This can lead to growth opportunities that sole proprietorships or partnerships might not easily access. So, becoming incorporated isn’t just about risk—it’s also about expanding horizons!
