Future Business Leaders of America (FBLA) Agribusiness Practice Test

What characteristic defines the perpetual existence of a corporation?

1. Ends when shareholders decide

2. Exists indefinitely unless terminated

3. Only lasts for a certain number of years

4. Requires renewal every year

The correct answer is: Exists indefinitely unless terminated

A corporation is defined by its characteristic of perpetual existence, which means that it continues to operate indefinitely until it is formally dissolved or terminated. This quality allows corporations to exist independently of the ownership changes; in other words, if shareholders sell their shares or pass away, the corporation can still continue to function unaffected. This permanence provides stability and can enhance the corporation's ability to raise capital, enter into contracts, and invest for the long term. In contrast, the other options suggest limitations or conditions that do not align with the nature of corporate existence. For instance, ending when shareholders decide implies that the corporation could dissolve based on the shareholders' actions, which contradicts the concept of perpetual existence. Similarly, stating that a corporation only lasts for a certain number of years or requires annual renewal suggests a temporary status rather than the continuous operational capacity that characterizes a perpetual corporation. Thus, the right answer highlights this fundamental aspect of corporate structure and longevity.