Which statement about corporations is true?

• A. They cannot raise capital
• B. They are independent legal entities separate from owners; require more regulations and tax requirements; owners benefit from liability protections; can raise money and sell stock
• C. They are not subject to corporate taxes
• D. They are the same as sole proprietorships in liability

Answer: (B)

Corporations operate as independent legal entities separate from their owners. This separation provides owners with limited liability—their personal assets are generally protected beyond the amount they’ve invested. They also face heavier regulatory and tax requirements, including formal governance, regular reporting, and corporate-level taxes. A key advantage is the ability to raise capital by selling stock, which fuels growth and expansion. In contrast, statements that they cannot raise capital, that they aren’t subject to corporate taxes, or that they are the same as sole proprietorships in liability don’t fit these fundamental features.