Wisconsin Esthetics State Board Practice Test

Which of the following is NOT a characteristic of a corporation?

1. It protects owners from personal liability

2. Ownership can be divided among shareholders

3. It is easier to raise capital compared to other structures

4. All profits must go to one individual

The correct answer is: All profits must go to one individual

The option indicating that all profits must go to one individual is not a characteristic of a corporation. In a corporate structure, profits can be distributed among multiple shareholders based on the number of shares they own. This is one of the primary benefits of a corporation: it allows for multiple investors to own a piece of the business and receive dividends based on their shareholding, rather than concentrating profits into a single individual's hands. Corporations are designed to be distinct legal entities that offer owners protection from personal liability, meaning shareholders are not personally responsible for the debts of the corporation. Additionally, the ownership structure of a corporation can be easily divided among many shareholders, facilitating easier access to capital since shares can be sold to raise funds for business activities.