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CS Professional · CSR and Social Governance · Financial and Non-financial Reporting of Different Non-Corporate Entities

Meera and Sunil agree to run a bakery and share profits equally under a written agreement, but they have not registered the firm. Which statement about the firm is correct as regards its status as a non-corporate entity?

The firm is a non-corporate entity because a partnership has no legal personality separate from its partners. Registration only affects the right to sue on certain claims. A written deed or earning profit does not make the firm a body corporate or a company.

  1. AIt is a non-corporate entity because it has no separate legal personality distinct from its partnersCorrect
  2. BIt is a body corporate because the agreement is in writing
  3. CIt becomes a company once it earns profit
  4. DIt cannot be a non-corporate entity until it is registered

Explanation

A partnership firm is not a separate legal person from its partners, whether or not it is registered. Registration affects the ability to enforce certain rights in court, not its non-corporate character. A written agreement or profits does not convert the firm into a company.

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