Which business type has a separate legal identity from its owners?

• A. Sole Trader
• B. Partnership
• C. Limited Company
• D. Nonprofit Organization

Answer: (C)

The concept being tested is legal personality—the idea that a business can be treated as a separate entity under the law. A limited company is the one that has this status: it can own assets, enter into contracts, borrow money, sue and be sued in its own name, and it continues to exist regardless of changes in ownership. Because of this separation, the owners’ liability is limited to the amount they have invested in the company.

In contrast, a sole trader and a general partnership don’t have a separate legal identity—the business activities are tied to the individuals, so personal assets can be at risk for business debts. A nonprofit organization can have separate legal personality if it's set up as a distinct legal entity (like a charity or company), but the standard example that clearly demonstrates separate legal identity is the limited company.