ACCA Applied Skills · Corporate and Business Law (Global) · Business, political and legal systems
Amara and Bola run a bakery together and share the profits. They have registered nothing with the company registry and have no written agreement. Which statement best describes the legal position of their business?
Amara and Bola have formed a partnership. Carrying on business together to make a profit creates one without any formality. Because the firm has not been incorporated, it has no separate legal personality, so the partners are personally liable for the business debts.
- AIt is a partnership, and Amara and Bola are personally liable for the business debtsCorrect
- BIt is a company with limited liability because they share profits
- CIt is a separate legal person whose owners cannot be sued
Explanation
Carrying on a business in common with a view to profit creates a partnership even without a written agreement or registration. A partnership of this kind has no separate legal personality, so the partners are personally liable. Limited liability requires incorporation (or registration as a limited liability entity), which has not happened.
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