Certified Apartment Portfolio Supervisor (CAPS) Practice Exam - Module 2

What is a characteristic of a C Corp ownership type?

1. Pass-through taxation

2. Limited liability protection

3. Only one owner allowed

4. Higher tax rates than other types

The correct answer is: Limited liability protection

A characteristic of a C Corporation (C Corp) ownership type is limited liability protection. This means that the personal assets of the owners (shareholders) are protected from the debts and liabilities of the corporation. In the case of a C Corp, shareholders are only liable for the corporation’s debts up to the amount they have invested in the company. This structure encourages investment and allows for greater financial risk-taking without jeopardizing personal wealth, which is particularly beneficial for businesses looking to grow and expand. The other choices do not accurately describe a C Corp. For instance, pass-through taxation refers to business structures like partnerships or S Corporations where income is taxed on the individual level rather than at the corporate level, which is not applicable to C Corps. Similarly, a C Corp can have multiple owners, as it allows for an unlimited number of shareholders, which is advantageous for raising capital. Lastly, while higher tax rates are a consideration for C Corps because they are taxed at the corporate level on their earnings, this attribute does not encapsulate the ownership aspect of a C Corp in the same way limited liability protection does.