Which of the following is a characteristic of a corporation?

• A. Ownership is not transferable
• B. Direct management by all shareholders
• C. Unlimited life of the owner
• D. Limited liability of shareholders

Answer: (D)

Verified step by step guidance

1. Step 1: Understand the concept of a corporation. A corporation is a legal entity that is separate from its owners (shareholders). It has specific characteristics that distinguish it from other business structures like sole proprietorships or partnerships.
2. Step 2: Review the characteristic of 'limited liability of shareholders.' This means that shareholders are only liable for the corporation's debts up to the amount they have invested in the company. Their personal assets are protected from corporate liabilities.
3. Step 3: Compare the other options provided in the question. For example, 'Ownership is not transferable' is incorrect because shares in a corporation can typically be bought and sold, making ownership transferable. Similarly, 'Direct management by all shareholders' is incorrect because corporations are usually managed by a board of directors and executives, not all shareholders. 'Unlimited life of the owner' is also incorrect because corporations have an unlimited lifespan, independent of the life of any owner.
4. Step 4: Identify the correct answer based on the characteristics of a corporation. The correct answer is 'Limited liability of shareholders,' as this is a defining feature of corporations.
5. Step 5: Summarize the reasoning. Corporations are designed to protect shareholders from personal liability, allow for transferable ownership, and operate independently of the lifespan of any individual owner. These features make corporations distinct from other business structures.