Which statement about corporations is correct?

• A. Not-for-profit organizations exist to maximize profits for owners.
• B. A corporation is a form of business that merges with other companies.
• C. A corporation provides limited liability protection for owners and is a common form of business organization.
• D. Sole proprietorship is the only form of business organization.

Answer: (C)

A corporation is a separate legal entity that provides limited liability for its owners and is a common form of business organization. This means the corporation can own assets, enter contracts, sue and be sued in its own name, and the owners (shareholders) are typically not personally liable for the company’s debts beyond their investment. The protection of personal assets makes it easier to raise capital since investors’ risk is limited to what they invest, and ownership can be easily transferred through the sale of shares. Corporations also tend to have perpetual existence, continuing regardless of changes in ownership, and they can issue stock to attract more capital.

This statement best captures what defines a corporation and the benefit that often drives people to choose this form. The other options describe scenarios that aren’t defining features: not-for-profit organizations aren’t set up to maximize profits for owners; they reinvest surplus revenues to support their mission. Mergers are actions a corporation might undertake, not what defines the corporate form. And there are many forms of business organization besides the sole proprietorship, so that option isn’t accurate.