Question

Which of the following is an advantage of incorporation of company?
(I) Limited Personality
(II) Limited Liability
(III) Limited Succession
Select the correct answer from the options given below-

• A. (I) but not (II) and (III)
• B. (II) but not (I) and (Ill)
• C. (III) but not (I) and (II)
• D. (II) but not (III) and (I)

Answer 1

The correct option is D (II) but not (III) and (I)

Following are the advantages of incorporation of a company:

1. Creates a Separate Legal Entity: This states that a company is independent and separate from its members, and the members cannot be held liable for the acts of the company, even when a particular member owns majority of shares.
   
2. Limited liability- limitation of liability is another major advantage of incorporation. The company, being a separate entity, leading its own business life, the members are not liable for its debts. The liability of members is limited by shares; each member is bound to pay the nominal value of shares held by them and his liability ends there.
   
3. Perpetual succession- An incorporated company never dies. Members may come and go, but the company will go on forever.
   
4. Transferable shares- when joint stock companies were established the great object was that the shares should be capable of being easily transferred.
   
5. Capacity for suits- A company can sue and be sued in its own name. The names of managerial members need not be impleaded.
   
6. Separate property- The property of an incorporated company is vested in the corporate body. The company is capable of holding and enjoying property in its own name. No members, not even all the members, can claim ownership of any asset of company’s assets.