Which of the following statements is true of a corporation?

• A. A corporation's owners are personally liable for its debts.
• B. A corporation is a separate legal entity distinct from its owners.
• C. A corporation dissolves automatically upon the death of a shareholder.
• D. A corporation cannot issue shares of stock to raise capital.

Answer: (B)

Verified step by step guidance

1. Understand the concept of a corporation: A corporation is a separate legal entity distinct from its owners, meaning it has its own rights and responsibilities under the law.
2. Clarify the liability aspect: Unlike sole proprietorships or partnerships, the owners (shareholders) of a corporation are not personally liable for the corporation's debts. Their liability is limited to their investment in the corporation.
3. Examine the continuity of existence: A corporation does not dissolve automatically upon the death of a shareholder. It continues to exist as a legal entity unless formally dissolved.
4. Review the ability to raise capital: Corporations can issue shares of stock to raise capital, which is one of their key advantages compared to other business structures.
5. Identify the correct statement: Based on the above clarifications, the correct statement is 'A corporation is a separate legal entity distinct from its owners.'