What is one key difference between a sole proprietorship and a corporation?

The distinction between a sole proprietorship and a corporation lies primarily in their ownership structure and legal status. In a sole proprietorship, the business is owned and operated by a single individual, making it a direct extension of the owner. This means there is no separation between the owner's personal assets and the business's liabilities; the individual assumes full responsibility for all the debts and obligations of the business.

On the other hand, a corporation is recognized as a separate legal entity, distinct from its owners, who are known as shareholders. This separation provides a significant advantage: shareholders typically enjoy limited liability, meaning they are not personally liable for the debts and obligations of the corporation beyond their investment in shares. Therefore, if the corporation faces legal issues or financial troubles, the personal assets of the shareholders are generally protected.

This fundamental difference highlights why the statement about ownership and legal separation is accurate, while the other options misrepresent or conflate the characteristics and responsibilities associated with these two types of business structures.