Which term describes a business that has legally undergone the process of being authorized to act as an individual entity?

• A. Corporation
• B. Partnership
• C. Sole Proprietorship
• D. Cooperative

Answer: (A)

Becoming a corporation gives a business its own legal personhood, separate from the owners. This status is created through formal incorporation, typically filing articles of incorporation and obtaining a charter. Once incorporated, the business can act in its own name—enter contracts, own property, sue or be sued—and can continue to exist even if ownership changes. Shareholders usually have limited liability, meaning their personal assets aren’t at risk for the company’s debts. This contrasts with a sole proprietorship, where the owner and business are one and the same and personal liability is not limited; and a partnership, where two or more people own the business and the business isn’t automatically a separate legal entity unless organized in a specific form. A cooperative is owned by its members and can be a separate legal entity, but the description given—being authorized to act as an individual entity—most directly points to the concept of incorporation into a corporation.