Which type of business entity is considered a separate legal entity from its owners?

A corporation is regarded as a separate legal entity from its owners, which provides protection to the shareholders from personal liability for the debts and obligations of the business. This characteristic of limited liability is one of the key reasons businesses choose to incorporate. Corporations can enter into contracts, sue or be sued, own assets, and are subject to taxation independently from their owners. This separation helps in creating a clear boundary between personal and business liabilities.

In contrast, a sole proprietorship and a partnership do not have this separate legal status. In these entities, the owners are personally liable for the business’s obligations, meaning their personal assets could be at risk if the business incurs debts or faces legal issues. A limited liability company (LLC) does provide some legal separation between the owners and the entity, similar to a corporation, but it is not a corporation itself. The distinction lies in the structural and operational features that corporations typically have compared to other business forms.