Final answer:
A legal entity with rights and liabilities that is separate from its members and is sanctioned by the state is known as a corporation. Corporations can own property, sue, be sued, and are recognized as separate from their owners, providing limited liability and other advantages.
Step-by-step explanation:
A legal entity sanctioned by the state, with rights and liabilities distinct apart from those of the persons composing it, is known as a corporation. This form of business structure provides numerous advantages such as protection from personal liability for its owners, ease of transferring ownership through stocks, unlimited lifetime as long as it operates, and the ability to enter into contracts, sue, or be sued independently of its shareholders. The evolution of the corporation reflects a fundamental shift in business practice; from the time of the Dutch East India Trading Company's founding in 1602 to the present, corporations have been recognized as separate legal entities capable of owning property, borrowing money, and being held accountable for their actions.
States, through their institutional frameworks, play a pivotal role in legitimizing and enforcing the distinct legal status of corporations. They ensure that such entities abide by regulations and can be penalized, usually financially, when they fail to comply with legal obligations or international treaties if applicable. The concept of a corporation, therefore, represents not only a business entity but also the intricate relationship between business, law, and state authority.