Practice Question
What is the main characteristic of a corporation?
Answer +
B
Step-by-step solutions +
The defining characteristic of a corporation is limited liability.
This means that shareholders are not personally responsible for the corporation’s debts or obligations beyond their investment in shares.
For example, if a corporation incurs debt or is sued, shareholders can only lose the money they invested, not their personal assets.
This legal separation between the corporation and its owners protects individual investors and encourages entrepreneurship.
Final Answer: B – Limited liability
This means that shareholders are not personally responsible for the corporation’s debts or obligations beyond their investment in shares.
For example, if a corporation incurs debt or is sued, shareholders can only lose the money they invested, not their personal assets.
This legal separation between the corporation and its owners protects individual investors and encourages entrepreneurship.
Final Answer: B – Limited liability