Multiple Choice
Which of the following is an advantage of a partnership but not of a sole proprietorship?
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1. Introduction to Accounting
Business Organization
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Which term describes a company that is authorized to operate as a legal person, separate from its owners?
A
Joint venture
B
Corporation
C
Sole proprietorship
D
Partnership
Verified step by step guidance1
Understand the concept of a corporation: A corporation is a legal entity that is separate and distinct from its owners. It has its own rights and responsibilities, such as entering contracts, owning assets, and being liable for debts.
Compare the characteristics of a corporation with other business structures: Sole proprietorships and partnerships are not separate legal entities; their owners are personally liable for business debts. A joint venture is a temporary partnership for a specific project and does not create a separate legal entity.
Recognize the key feature of a corporation: The ability to operate as a legal person, separate from its owners, is unique to corporations. This means the corporation itself can sue, be sued, and own property independently of its shareholders.
Review the options provided: Joint venture, sole proprietorship, and partnership do not meet the criteria of being a separate legal entity. Only a corporation fits the description.
Conclude that the correct term describing a company authorized to operate as a legal person, separate from its owners, is 'Corporation.'
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