Question

a) From legal point of view, a joint stock company is recognised as separate legal entity from the shareholders.
b) Partnership firms and sole trading businesses do not have legal entity, but they have business entity for accounting purposes.
Of these

• A. Both (a) and (b) are true
• B. Both (a) is true, (b) is false
• C. (a) is false, but (b) is true
• D. Both (a) and (b) are false

Answer 1

The correct option is A Both (a) and (b) are true

A corporation is a legal entity that is separate and distinct from its owners. Corporations enjoy most of the rights and responsibilities that individuals possess: they can enter contracts, loan and borrow money, sue and be sued, hire employees, own assets and pay taxes. Some refer to it as a "legal person."

A Partnership firm has no separate legal existence of its own i.e., the Partnership firm and the partners are one and the same in the eyes of law.

The sole proprietorship is the simplest business form under which one can operate a business. The sole proprietorship is not a legal entity.