Which of the following statements about the operation of a corporation is correct?
A) A corporation is a separate entity and is legally formed under state laws.
B) A corporation automatically expires in 99 years and must be renewed if a corporation wants to remain in business.
C) Owners of a corporation have unlimited liability for any claims against their company.
D) A corporation tends to be much easier to set up than a sole proprietorship or partnership.
E) All profits and losses flow through the corporation owners' personal tax returns.

Question

Quizplus · Accepted Answer

A corporation is a separate legal entity that is created by state law. This means that it has its own legal rights and liabilities, can enter into contracts, and can sue or be sued.

B is incorrect because the length of time a corporation can exist varies by state and can be perpetual.

C is incorrect because one of the advantages of a corporation is limited liability, meaning that owners are not personally liable for the corporation's debts or obligations.

D is incorrect because setting up a corporation typically involves more paperwork and legal requirements than a sole proprietorship or partnership.

E is incorrect because a corporation's profits and losses are separate from the personal tax returns of its owners and are instead taxed at the corporate level.

Which of the Following Statements About the Operation of a Corporation