Which of the following is not a characteristic of company?

Which of the following is not a characteristic of company?

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → Unlimited liability

A company is an artificial person created by law, and its special features follow from that: it has a separate legal entity, it never dies with its members (perpetual succession), it signs through a common seal, and its members carry only limited liability. Unlimited liability belongs to a sole proprietor or a partner; a company member’s liability is limited to the unpaid amount on his shares (or to his guarantee), so it is the odd one out.

Option (1) Separate legal entity — A feature of a company. The company is distinct from its members; it can own property, make contracts and open a bank account in its own name.
Option (2) Common Seal — A feature of a company. An artificial person cannot sign, so its seal acts as its official signature.
Option (4) Perpetual succession — A feature of a company. The company continues whatever happens to its members; it ends only through law.

NCERT (2026-27 edition):
Features of a Company – “… Separate Legal Entity: A company has a separate legal entity which is distinct and separate from its members. It can hold and deal with any type of property. It can enter into contracts and even open a bank account in its own name. Limited Liability: The liability of the members of the company is limited to the extent of unpaid amount of the shares held by them. In the case of the companies limited by guarantee, the liability of its members is limited to the extent of the guarantee given by them in the event of the company being wound up.”

NCERT (2026-27 edition):
Features of a Company – “… Perpetual Succession: The company being an artificial person created by law continues to exist irrespective of the changes in its membership. A company can be terminated only through law. The death or insanity or insolvency of any member of the company in no way affects the existence of the company. Members may come and go but the company continues. Common Seal: The company being an artificial person, cannot sign its name by itself. Therefore, every company is required to have its own seal which acts as official signatures of the company.”

Which of the following is not a characteristic of company?

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → Unlimited liability

Option (1) Separate legal entity — A feature of a company. The company is distinct from its members; it can own property, make contracts and open a bank account in its own name.
Option (2) Common Seal — A feature of a company. An artificial person cannot sign, so its seal acts as its official signature.
Option (4) Perpetual succession — A feature of a company. The company continues whatever happens to its members; it ends only through law.