ACCA Applied Skills · Corporate and Business Law (Global) · Corporations and legal personality
Priya wants to run a consultancy and keep her personal assets protected from business debts, while having a separate legal person that can own property and sue in its own name. Which type of organisation best meets these needs?
A registered company limited by shares best meets her needs. It has separate legal personality, so it can own property and sue in its own name, and shareholders' liability is limited to any unpaid amount on their shares. Sole traders and general partnerships offer neither separate personality nor limited liability.
- AA sole trader business
- BA general partnership with herself and a friend
- CA registered company limited by sharesCorrect
Explanation
A registered company has separate legal personality and shareholders' liability is limited to unpaid share capital, so it owns property and sues in its own name. A sole trader and a general partnership have no separate personality and owners bear unlimited liability. Hence the first two fail.
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