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CS Executive · Setting Up of Business, Industrial and Labour Laws · Selection of Business Organization

Meera and Arjun plan to start a trading business in Pune and wish to form a private company under the Companies Act, 2013. Which feature distinguishes a company from a partnership firm?

A company has a separate legal personality distinct from its members. It can own property, sue and be sued in its own name, and enjoys perpetual succession, unlike a partnership firm, which has no separate legal identity from its partners.

  1. AIt has a separate legal personality distinct from its membersCorrect
  2. BIt cannot own property in its own name
  3. CIts members are always personally liable for its debts
  4. DIt ceases to exist when a member dies

Explanation

A registered company is an artificial legal person separate from its members, so it can own property and sue in its own name. Option 2 is wrong because a company can hold property. Option 3 describes unlimited liability, which does not apply to a company limited by shares. Option 4 is wrong because a company has perpetual succession.

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