632598256894

Recognition of Corporations and Limited Liability Companies as Legal
Entities
The corporation and LLC are our first full-fledged separate legal entities. Ownership of business
assets is vested solely in the corporation or LLC, as separate legal entities. The corporation or LLC
itself is plaintiff and defendant in suits and is the legally contracting party in all of its transactions.
Stockholders and members own only their stock or membership interests and have no direct ownership
rights in the business‟s assets.
Recognition of Limited Partnerships as Legal Entities
The limited partnership, continuing in its role as a hybrid, is a little of both partnership and
corporation. Although in some states the partnership‟s property is owned in the name of the limited
partnership and treated, for purposes of title, in the same way as property owned by a corporation, in
other states the general partners own the partnership‟s property as tenants in partnership, operating in
the same manner as partners in a general partnership. In those states, the limited partners have only
their partnership interests and no direct ownership of the partnership‟s property. This is logically
consistent with their roles as silent investors. If they directly owned partnership property, they would
have to be consulted with regard to its use.
Continuity of Life
The issue of continuity of life is one that should concern most entrepreneurs, because it can affect their
ability to sell the business as a unit when it comes time to cash in on their efforts as founders and
promoters. The survival of the business as a whole, in the form of a separate entity, must be
distinguished from the survival of the business‟s individual assets and liabilities.
Sole Proprietorships
Although a sole proprietorship does not survive the death of its owner, its individual assets and
liabilities do. In Phil‟s case, for example, to the extent that these assets consist of the computer
program, filing cabinets, and the like, they would all be inherited by Phil‟s heirs, who could then
choose to continue the business or liquidate the assets as they pleased. Should they decide to continue
the business, they would then have the same choices of business form that confront any entrepreneur.
However, if Phil‟s major asset were a government license, qualification as an approved government
supplier, or a contract with a software publisher, the ability of the heirs to carry on the business might
be entirely dependent upon the assignability of these items. If the publishing contract is not assignable,