ACCA Applied Knowledge · Business and Technology · The purpose and types of business organisation
Which of the following is a defining feature of a company incorporated with limited liability, as distinct from a sole trader?
A limited liability company has a separate legal personality from its shareholders. It can own property, enter contracts and be sued in its own name, and it continues despite changes in ownership. Unlimited personal liability describes sole traders and partners, not limited company members.
- AThe owners are personally liable for all business debts without limit
- BThe company has a separate legal personality from its shareholdersCorrect
- CThe business ceases to exist when the main owner dies
- DThe business has no obligation to keep accounting records
Explanation
Incorporation creates a separate legal entity that can own assets, sue and be sued in its own name. A sole trader has no such separation, so option A and C describe unincorporated features. Companies are required to keep accounting records, so D is wrong.
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