ACCA Applied Knowledge · Business and Technology · The purpose and types of business organisation
Which of the following is the defining legal feature of a company limited by shares that distinguishes it from a sole trader?
A company limited by shares has separate legal personality, meaning it exists as a legal person distinct from its owners. It can hold property, make contracts and be sued in its own name, unlike a sole trader, whose business is legally the same as the owner.
- AIt has separate legal personality from its ownersCorrect
- BIt must be listed on a stock exchange
- CIt is always owned by more than 50 shareholders
- DIt cannot enter into contracts in its own name
Explanation
A company is a legal person distinct from its members, so it can own assets, sue and be sued in its own name. A sole trader has no such separation. Listing and shareholder numbers are not defining features, and a company can contract in its own name.
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