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(b) That's right. When a company is created, the law treats the company as if it were a person with its own separate identity.

Obviously, a company does not exist in the same physical sense as does a human being. It is, rather, an 'artificial' person, that exists in law rather than naturally. As a legal person, a company exists independently from those natural persons who create and operate it. In addition, it has most of the legal powers and capacities that a natural person has. In other words, a company has its own 'persona' and is capable of acquiring legal rights and discharging legal duties in its own name.

This characteristic of a separate legal personality makes a company a convenient and powerful business organisation. Companies are the most commonly used type of business organisation. In Australia, there are over 2 million companies carrying on various types of business.

Lee v Lee's Air Farming Ltd [1961] AC 12.

Salomon v A Salomon & Co Ltd [1897] AC 22.