Paralegal Advanced Competency Exam (PACE) Practice Exam

What legal power does a corporation possess that distinguishes it from individuals?

1. The ability to vote in elections as a collective

2. The right to sue and be sued in its own name

3. The power to issue currency

4. The authority to create law changes directly

The correct answer is: The right to sue and be sued in its own name

A corporation possesses the legal right to sue and be sued in its own name, distinguishing it from individuals in several significant ways. This characteristic, known as "corporate personhood," allows a corporation to function independently of its owners and shareholders. By being able to engage in legal actions, a corporation can enter contracts, own property, and pursue or defend itself in litigation, which is crucial for its operations and for gaining redress in disputes. The other choices do not accurately reflect the unique legal powers of a corporation. For instance, while individuals can vote in elections, corporations do not have that ability since voting is limited to citizens. Corporations cannot issue currency since that power is reserved for sovereign entities, such as national governments. Furthermore, while corporations can lobby for changes in law or policy, they do not have the direct authority to create law changes; that power rests with legislative bodies. Thus, the ability to sue and be sued encapsulates a fundamental legal distinction between corporations and individual persons.