What is a corporation?

• A. A legal entity separate from its owners.
• B. A nonprofit organization.
• C. An informal group of individuals.
• D. A sole proprietorship.

Answer: (A)

A corporation is a legal entity created by law that stands apart from the individuals who own it. This separation means the company can own property, enter contracts, and sue or be sued in its own name. Shareholders have limited liability, so their personal assets are generally protected beyond their investment in the company. A corporation is governed by a board of directors and officers and can continue despite changes in ownership.

Nonprofit organizations can be corporations, but not all corporations are nonprofit; many are for-profit. An informal group of individuals lacks separate legal status, and a sole proprietorship is owned by one person and is not a separate entity from the owner, with unlimited personal liability.