Paralegal Advanced Competency Exam (PACE) Practice Exam

What is the primary function of a company as a legal entity?

1. To manage personal finances of its owners

2. To provide legal advice to individuals

3. To pursue set objectives with the right to profits

4. To promote social causes for its members

The correct answer is: To pursue set objectives with the right to profits

The primary function of a company as a legal entity is to pursue set objectives with the right to profits. This captures the essence of what a corporation or company is established for – to engage in commercial activities with the goal of generating income for its shareholders or owners. As a legal entity, a company can enter into contracts, sue and be sued, and carry out business activities independently of its owners. By focusing on profit generation, companies create value not only for themselves but also for their shareholders, employees, and the economy in general. While social causes may be important to some companies, and they may engage in Corporate Social Responsibility (CSR), the intrinsic purpose for the establishment of a business entity centers on profit-making and achieving the objectives set forth in its formation, such as expanding market share, increasing revenues, or launching new products and services.