ACCA Applied Skills · Corporate and Business Law (Global) · Corporations and legal personality
Amara and Tobias run a bakery together and have not registered any formal business structure. They share profits equally and have no written agreement. Which statement best describes the legal position of their business under general partnership principles?
The bakery is a partnership. A partnership exists where two or more persons carry on business in common with a view to profit, and no registration or written agreement is needed. Separate legal personality only arises on incorporation, so co-ownership alone does not create a company.
- AIt is a partnership, because two persons carry on a business in common with a view to profitCorrect
- BIt is a company, because any business with two owners gains separate legal personality automatically
- CIt is a sole trader business, because only one of them signed the bakery lease
Explanation
A partnership arises from the relationship between persons carrying on a business in common with a view to profit, and no registration or written agreement is required. Separate legal personality for a company needs incorporation, so the second option is wrong. The lease signature does not turn a joint business into a sole trade.
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