Carlos founded the "Taco Factory" 20 years ago as a family-oriented restaurant. Over the years as they grew the business, he incorporated and sold stock to outside investors. Recently the stockholders voted to seek liquor licenses and to sell beer and hard liquor in the restaurants. Carlos opposed this, citing the history of the restaurant's "family" environment, but was voted down. Carlos has experienced which drawback of the corporate form of ownership? a. The inability to accumulate capitalb. The potential for diminished managerial incentivesc. Legal requirements and red taped. The potential loss of control

Question

Eva Holmes

Business

19 January, 08:40

Carlos founded the "Taco Factory" 20 years ago as a family-oriented restaurant. Over the years as they grew the business, he incorporated and sold stock to outside investors. Recently the stockholders voted to seek liquor licenses and to sell beer and hard liquor in the restaurants. Carlos opposed this, citing the history of the restaurant's "family" environment, but was voted down. Carlos has experienced which drawback of the corporate form of ownership? a. The inability to accumulate capitalb. The potential for diminished managerial incentivesc. Legal requirements and red taped. The potential loss of control

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Answers (1)

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Kash Buckley · Answer 1

The potential loss of control

Explanation:

The advantage of being the owner and able to take decision at anytime without consultation enjoyed by a sole trader is lost if the business becomes a corporation. In this case, Carlos couldn't stop the decision by the stakeholders to dealing in liquor, because he has lost control due to dilution of ownership.