What is the main legal advantage of forming a company rather than operating as a sole proprietorship?
Correct answer: B. The company has a separate legal identity
- A. The company avoids every business loss
- B. The company has a separate legal identity
- C. The company needs no financial records
- D. The company cannot be sued by creditors
Explanation
A company is generally a legal person separate from its members, which allows it to own property and incur liabilities in its own name. Separate identity does not eliminate losses, records, or legal proceedings.
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About Nature and Forms of Business Organisation
Business organisation combines people, capital, materials and entrepreneurship to produce goods or services and earn profit, while also meeting customer and social needs. Coverage includes sole proprietorships, partnerships, companies and cooperatives, with comparisons of ownership, liability, control, profit sharing, continuity and legal status.
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