Accountancy Part AAccounting for Shares

From the following, which is not a feature of a company?

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → Unlimited Liability

A company’s members are liable only up to the amount unpaid on their shares: its liability is limited, not unlimited. Unlimited liability is a feature of a partnership firm or a sole proprietor.

Option (1) Separate Legal Entity — A feature of a company. The company exists apart from its members, holds property and makes contracts in its own name.
Option (2) Common Seal — A feature of a company. Being an artificial person, the company signs documents through its common seal.
Option (3) Transferability of Shares — A feature of a company. Shares of a public company are freely transferable, so members can come and go.

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.”