Which term describes a separate legal entity formed for conducting business activity, owned by shareholders who contribute to share capital and receive profits as dividends?

Which term describes a separate legal entity formed for conducting business activity, owned by shareholders who contribute to share capital and receive profits as dividends?

• A. Partnership
• B. Cooperative
• C. A company
• D. Sole trader

Answer: (C)

A company is a separate legal entity formed to carry on business. It has its own legal identity distinct from its owners, the shareholders. These shareholders contribute capital by buying shares and, in return, receive profits as dividends in proportion to their shareholding. This setup differs from other forms: a partnership is owned by two or more people and may not create a fully separate legal entity in all cases, with liability often shared; a cooperative is owned by its members who use its services and share profits among them; a sole trader is owned by one person and there is no separation between owner and business, with profits going directly to that individual.

A company is a separate legal entity formed to carry on business. It has its own legal identity distinct from its owners, the shareholders. These shareholders contribute capital by buying shares and, in return, receive profits as dividends in proportion to their shareholding. This setup differs from other forms: a partnership is owned by two or more people and may not create a fully separate legal entity in all cases, with liability often shared; a cooperative is owned by its members who use its services and share profits among them; a sole trader is owned by one person and there is no separation between owner and business, with profits going directly to that individual.