In basic business organisation theory, a business that is organised as a corporation has which key ownership characteristic?

Introduction / Context:
Forms of business organisation such as sole proprietorship, partnership and corporation are a standard topic in business studies and accounting. Each form has distinctive features relating to ownership, liability, taxation and legal status. Questions often test whether you can correctly identify these features. In particular, the corporation is known for being a separate legal entity with ownership divided into shares held by stockholders. Recognising this characteristic helps you understand corporate governance and financial reporting.

Given Data / Assumptions:

• The question refers to a business organised as a corporation.
• We compare statements about ownership, tax advantages, legal entity status and shareholder liability.
• We assume a typical legal framework in which corporations have separate legal personality and limited liability for shareholders.
• The task is to identify the statement that correctly describes a core feature of the corporate form.

Concept / Approach:
A corporation is a legal entity created under law, distinct from its owners. Ownership is represented by shares of stock, and the people who hold these shares are called stockholders or shareholders. They have an ownership interest but their liability is usually limited to the amount invested. The corporation itself can own property, incur debts and sue or be sued in its own name. In contrast, a sole proprietorship has a single owner with unlimited liability, and a partnership has partners who may also face significant personal liability. Therefore the key correct statement will mention stockholder ownership and avoid claiming that shareholders are personally liable for corporate debts.

Step-by-Step Solution:
Step 1: Examine option a, which says that a corporation "is owned by its stockholders". This matches the standard definition, because shares of stock represent ownership claims on the corporation.Step 2: Consider option b, which claims that a corporation has tax advantages over a proprietorship or partnership. In many jurisdictions, corporations actually face double taxation on profits and dividends, so this is not a universal advantage.Step 3: Look at option c, which states that a corporation "is not a separate legal entity in most states". This is the opposite of the truth, because separate legal personality is a hallmark of the corporate form.Step 4: Review option d, which says that stockholders must be personally liable for the debts of the business. This contradicts the concept of limited liability, where shareholders normally risk only the capital they have invested.Step 5: By elimination and direct definition, option a is the correct statement.

Verification / Alternative check:
You can verify by thinking about common phrases such as "publicly owned corporation" or "shareholder owned company". These expressions underline that ownership resides with the shareholders. Another check is to recall the separation of ownership and management: in a corporation, stockholders provide capital and elect a board of directors, but managers run day to day operations. This clear separation, combined with limited liability, confirms the correctness of the ownership statement in option a.

Why Other Options Are Wrong:
Option b is misleading because while corporations may enjoy certain benefits, such as easier access to capital, they are often subject to separate corporate tax and then shareholders pay tax on dividends, resulting in double taxation rather than an automatic tax advantage. Option c is simply false; the corporation's distinct legal identity is a defining feature. Option d also misstates the law, because one of the main attractions of forming a corporation is that shareholders are not personally liable for corporate debts beyond their investment. These reasons make options b, c and d incorrect.

Common Pitfalls:
Candidates sometimes assume that the main benefit of a corporation must be lower taxes, but tax outcomes depend heavily on jurisdiction and specific structures. Another pitfall is confusing legal liability in partnerships, where partners may have personal responsibility, with corporations, where liability is generally limited. To avoid errors, focus on the core triad that defines corporations: separate legal entity, stockholder ownership and limited liability. Remembering this trio makes it easier to reject statements that contradict these basic features.

Final Answer:
A business organised as a corporation is owned by its stockholders, who hold shares representing their ownership interest in the company.