Which one of the following statements regarding corporations is correct?

• A. Corporations are separate legal entities from their owners.
• B. Corporations have unlimited liability for their shareholders.
• C. Corporations are not required to pay income taxes.
• D. Corporations cannot issue shares to raise capital.

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the concept of a corporation. A corporation is a separate legal entity that is distinct from its owners (shareholders). This means it can own assets, incur liabilities, and enter into contracts independently of its shareholders.
2. Step 2: Analyze the first statement: 'Corporations are separate legal entities from their owners.' This is a correct statement because the legal structure of a corporation ensures that it operates independently of its shareholders.
3. Step 3: Analyze the second statement: 'Corporations have unlimited liability for their shareholders.' This is incorrect because shareholders of a corporation have limited liability, meaning they are only liable up to the amount they invested in the corporation.
4. Step 4: Analyze the third statement: 'Corporations are not required to pay income taxes.' This is incorrect because corporations are required to pay income taxes on their profits, as they are treated as separate taxable entities.
5. Step 5: Analyze the fourth statement: 'Corporations cannot issue shares to raise capital.' This is incorrect because one of the primary advantages of a corporation is its ability to issue shares to raise capital from investors.