Which term describes a company that is a separate legal entity from its owners?

• A. Limited company
• B. Partnership
• C. Mutual organisation
• D. Franchise

Answer: (A)

Legal personality means the business is recognised as a separate entity from its owners. A limited company has this status, so it can own assets, enter contracts, sue or be sued in its own name, and the owners’ liability is limited to what they have invested. That combination—a distinct legal identity and limited liability—is what the term describes.

In contrast, a partnership typically does not have separate legal personality, so partners can be personally liable for debts. A mutual organization is a member-owned structure, which may or may not be a separate legal entity, but the clear, standard example of a separate legal entity in business studies is a limited company. A franchise relates to a business model rather than the legal nature of the entity itself.