Which business structure best provides a legal separation between personal and business finances?

• A. Sole trader
• B. Limited company
• C. Partnership
• D. Franchise

Answer: (B)

The key idea is legal personality and limited liability: a limited company is a separate legal entity from its owners, so it can own assets, enter contracts, and be sued in its own name. This separation means the company’s finances are distinct from the owners’ personal finances, and the owners are protected from most business debts beyond their investment. In contrast, a sole trader or a general partnership does not create that shield, so personal assets can be at risk for business obligations. A franchise is not a legal structure by itself; it’s a business model that can operate under different legal forms, but the protection comes from using a structure like a limited company.