Successful Salon & Spa Management 2025 – 400 Free Practice Questions to Pass the Exam

Question: 1 / 400

What is defined as an institution recognized as a separate legal entity?

Partnership

Corporation

A corporation is defined as a separate legal entity, which means it can own property, enter into contracts, and be held liable for its actions independently of its owners (shareholders). This legal structure provides limited liability protection to its shareholders, meaning their personal assets are generally protected from the corporation's debts and legal issues.

In contrast, a partnership involves two or more individuals who share ownership and liability, which does not grant the same legal separation. A sole proprietorship is owned and operated by an individual who is personally liable for all business debts, making it not a separate legal entity. Meanwhile, a non-profit organization can also operate as a separate legal entity, but its primary focus is on furthering a social cause rather than profiting for owners or shareholders. Thus, the defining characteristic of being a separate legal entity specifically aligns with a corporation, making it the correct choice.

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Sole proprietorship

Non-profit organization

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