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Difficulty: MediumSole Proprietorship: Features, Capital Sources, Merits, and Demerits

A major legal characteristic of a sole proprietorship is that the enterprise lacks a separate legal entity from its owner, which directly results in a lack of perpetual succession.

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Answer

True
The statement is correct because a sole proprietorship is an unincorporated enterprise without distinct legal personality, causing the business to lack perpetual succession.

Step-by-Step Solution

1
Examine the legal personality of a sole proprietorship
Under commercial law, a sole proprietorship is an unincorporated business entity where the business and the owner are regarded as one and the same legal entity.
Incorporation is required to create a separate legal personality, which sole proprietorships do not undergo.
2
Assess the impact of legal status on business continuity
Because the firm has no legal existence separate from the owner, it lacks perpetual succession, meaning the business legally comes to an end upon the death or incapacitation of the proprietor.
Perpetual succession requires an entity status that survives changes in ownership or death of individual members.

Key Concept

Lack of Separate Legal Entity and Perpetual Succession in Sole Proprietorship
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Topics

Sole Proprietorship: Features, Capital Sources, Merits, and Demerits

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