Which form(s) of business entities create a separate legal entity?

A corporation and a limited liability company (LLC) are both recognized as separate legal entities from their owners. This means they can own property, enter into contracts, sue, and be sued in their own names.

In the case of a corporation, it is created by filing Articles of Incorporation with the state and is considered a distinct entity, which provides limited liability to its shareholders. Shareholders are typically not personally responsible for the debts and liabilities of the corporation.

A limited liability company combines the benefits of both a corporation and a partnership. Like a corporation, an LLC protects its owners (members) from personal liability for business debts and obligations. Additionally, an LLC is more flexible in terms of taxation and management structure compared to a corporation.

In contrast, a sole proprietorship and a partnership do not create separate legal entities. In a sole proprietorship, the business is owned and operated by an individual, meaning there is no distinction between the owner and the business. Similarly, in a partnership, the business is owned by two or more people, and the partners share in the profits and liabilities. Therefore, both sole proprietorships and partnerships can expose their owners to personal liability for business obligations.

This understanding clarifies why the correct answer identifies corporations