Which statement about a company is true?

• A. A company is a government agency.
• B. A company is any group of individuals who share ownership.
• C. A company is a business that is a separate legal entity from its owners, who have limited liability.
• D. A company is a nonprofit organization.

Answer: (C)

Understanding the concept being tested: a company is a separate legal entity from its owners, and its owners have limited liability. This means the business itself can own assets, sue or be sued, enter contracts, and continue operating independently of the people who own it. Owners are protected so they can only lose what they invested, not their personal possessions, which is the hallmark of limited liability.

This combination—independent legal existence and limited liability—sets a company apart from other arrangements like government agencies or informal groups that share ownership, where there isn’t a distinct legal entity or the owners aren’t shielded from personal liability. It also clarifies why nonprofits aren’t defined by owner-protection in the same way, since their structure and goals differ from a typical for-profit company.