Accountancy Part AAccounting for Shares

Which of the following is not a feature of a company?

Which of the following is not a feature of a company?

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → Unlimited Liability

A company is a legal person created by law. Among its features are a separate legal entity, a common seal as its signature, and limited liability of its members. Unlimited liability is the opposite of a company’s feature, so it is the odd one out.

Option (1) Separate legal entity — A feature of a company. The company exists apart from its members and can own property and make contracts in its own name.

Option (2) Common seal — A feature of a company. Being an artificial person, the company signs through its own seal.

Option (3) Limited Liability — A feature of a company. Members are liable only up to the unpaid amount on their shares.

NCERT (2026-27 edition):
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.”

NCERT (2026-27 edition):
Limited Liability – “… The liability of the members of the company is limited to the extent of unpaid amount of the shares held by them.”

NCERT (2026-27 edition):
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. Any document which does not carry the common seal of the company is not binding on the company.”