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Questions and Answers
Which statement accurately describes a corporation?
Which statement accurately describes a corporation?
- c. A corporation is a distinct legal entity with its own authority and liability. (correct)
- b. A corporation is solely responsible for its owners' actions.
- a. A corporation can't engage in legal actions without its owners' consent.
- d. A corporation's owners are personally liable for all its obligations.
What is the main characteristic of a corporation?
What is the main characteristic of a corporation?
- d. It is a distinct legal entity with its own authority and liability. (correct)
- a. It requires the consent of its owners for legal actions.
- c. It has no authority or liability.
- b. It is solely responsible for its owners' actions.
What is the liability of a corporation's owners?
What is the liability of a corporation's owners?
- d. They have no liability in relation to the corporation.
- b. They are solely responsible for all obligations of the corporation.
- a. They are not liable for any obligations of the corporation. (correct)
- c. They are personally liable for all obligations of the corporation.
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Study Notes
Corporation Characteristics
- A corporation is a legal entity that is separate from its owners, known as shareholders.
- The main characteristic of a corporation is limited liability, which means that the owners' personal assets are protected from the corporation's debts and obligations.
Liability of Corporation's Owners
- The liability of a corporation's owners is limited to the amount of their investment in the corporation.
- This means that shareholders are not personally responsible for the corporation's debts and obligations, and their personal assets are not at risk.
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