Which statement describes a primary disadvantage of publicly traded companies?

• A. Raise funds by selling stock
• B. Tax-exempt status
• C. Increased regulatory scrutiny
• D. Limited liability protection

Answer: (C)

Publicly traded companies face greater regulatory scrutiny because they must regularly disclose detailed financial information, maintain rigorous internal controls, and comply with stringent governance and reporting requirements set by regulators and stock exchanges. This ongoing oversight increases compliance costs, imposes processes and audits, and adds the risk of penalties for misstatements or control failures. All of this makes being a public company more burdensome from a regulatory and administrative standpoint, which is the primary drawback.

Raising funds by selling stock is a benefit of going public, providing access to capital. Tax-exempt status applies to non-profit entities, not for-profit corporations. Limited liability protection is a benefit of incorporation, shielding owners from personal liability.