Which of The Following Is Not True of a Corporation? (Answer)

Which of The Following Is Not True of a Corporation?

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Which of The Following Is Not True of a Corporation?

You are asked to determine which of the following is NOT TRUE of a corporation between the following:

  • The corporation can be sue directly
  • The corporation owners are personally liable for the debt and liabilities of the company
  • The corporation can enter into legally binding contracts
  • The corporation can own title to property, purchase and sell assets?

The incorrect statement here is that the company owners are personally liable for the corporation’s actions.

In fact, company stockholders have what’s called limited liability protection.

In other words, they cannot be personally held liable for the debt, liabilities, and obligations of the corporation in case of default or non-performance.

Limited liability protection

Many entrepreneurs and business owners choose a corporation as a legal entity to do business for the main objective of benefiting from the limited liability protection.

In essence, since the corporation is a separate legal entity, the shareholders are personal “protected”.

If the corporation becomes indebted or is in default of certain legal or financial obligations, the company creditors cannot go after the shareholder’s personal assets.

The shareholder’s personal assets are shielded from possible recourse taken by the corporation’s creditors.


In this article, we’ve answered the question “which of the following is not true of a corporation”.

Let’s look at a summary of our findings.

Which of The Following Is NOT TRUE of a Corporation?

  • True: a corporation is a separate legal entity
  • True: a corporation can own, buy and sell assets
  • True: a corporation can be sued in court
  • NOT True: the shareholders are liable for the corporation’s debt and actions

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