What happens on incorporation?

Prepare for the ATT Law Exam. Practice with multiple choice questions, each providing hints and explanations. Be well-prepared for exam day!

Multiple Choice

What happens on incorporation?

On incorporation, a company gains its own separate legal identity. This corporate personality means the company exists in law as its own person, distinct from its shareholders. With this status it can own assets, enter into contracts, and, crucially, sue and be sued in its own name. This separation is why the company can borrow money, own property, and continue regardless of changes in ownership. The other statements don’t fit with what incorporation creates. A newly formed company does not dissolve automatically after registration. The usual expectation is continued existence unless it is dissolved or wound up. Also, shareholders’ liability is typically limited to the amount unpaid on their shares, not unlimited. And the company can own property in its own right, separate from the private property of its shareholders.

On incorporation, a company gains its own separate legal identity. This corporate personality means the company exists in law as its own person, distinct from its shareholders. With this status it can own assets, enter into contracts, and, crucially, sue and be sued in its own name. This separation is why the company can borrow money, own property, and continue regardless of changes in ownership.

The other statements don’t fit with what incorporation creates. A newly formed company does not dissolve automatically after registration. The usual expectation is continued existence unless it is dissolved or wound up. Also, shareholders’ liability is typically limited to the amount unpaid on their shares, not unlimited. And the company can own property in its own right, separate from the private property of its shareholders.

More practice questions