Which term best describes a corporation?

• A. Corporations
• B. A general partnership
• C. A sole proprietorship
• D. Limited Partnerships

Answer: (A)

A corporation is a separate legal entity that exists independently of its owners. It can own property, enter contracts, sue and be sued, and it can continue in existence regardless of changes in ownership. Shareholders have limited liability, meaning their personal assets are generally protected from the company’s debts, and ownership is transferable through stock.

Other business forms tie owners more directly to the business and carry different liability risks: a sole proprietorship or general partnership involves unlimited personal liability for the owners, while a limited partnership mixes general partners with unlimited liability and limited partners with liability limited to their investment. The combination of a distinct legal entity, limited liability for owners, and transferable ownership best describes the term corporations.