Learn more about what perpetual existence means in business.
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The definition of perpetual existence is not straightforward and can be challenging to explain. But essentially, perpetual existence means that a company can remain a legal entity regardless of a change in ownership — in other words, the company can exist perpetually despite ownership changes. Our business experts can guide you through all your legal and compliance requirements when opening and operating your company. Today, we’ll take a look at the concept of perpetual existence and what it means for your company.
A business owner would be wise to acquaint themselves with the meaning of perpetual existence. Under the Model Business Corporation Act —which is used as the basis for business codes in 32 states — every registered corporation “has perpetual duration and succession in its corporate name.” Perpetual existence makes it possible for a business to have a legal identity separate from the owners. While officers, owners, or shareholders might come and go, the company can continue with a consistent identity and ordinary operations.
However, some business owners can benefit from a project with limited scope. If you want to limit a corporation’s duration to a task or timeframe, you can do so in your Articles of Incorporation. If you want to start a limited liability company (LLC), you can limit its term of existence in your Articles of Organization or Operating Agreement. We can help you create an efficient and comprehensive Operating Agreement with our LLC Operating Agreement Template. If you don’t include an end date, the government assumes you intend to have perpetual existence.
The perpetual existence business definition means a company can make contracts, hold property, accept investments, maintain liability, and be sued regardless of ownership changes. By default, a registered company will continue as a separate legal entity if an owner dies, leaves the company, or goes bankrupt.
Perpetual existence has advantages — like the fact that you don’t need to file paperwork to continue your limited liability status when your company changes ownership. However, perpetual existence has disadvantages, too. A business must file an annual report and pay taxes in most states. You must formally dissolve your business before closing to avoid owing late fees and fines. If you don’t alert the government that your business is closed, it will continue to expect yearly taxes and biennial filings.
A business owner might need to recognize these other names for perpetual existence:
Without incorporation or registration, a sole proprietorship typically ends with the owner’s death. Regardless of the term you use, perpetual existence enables a registered company to continue even if its owners die or leave the company. Shareholders and investors count on perpetual existence to protect their investment in case of unforeseen events or mergers.
Perpetual existence means that, by default, a registered company maintains its legal existence regardless of ownership changes. Shareholders and investors can rest assured that their investment won’t disappear if an owner dies or sells the company.
We help entrepreneurs like you start companies and continue to grow through our many business services. We also help you meet your goals without being tied to the office completing paperwork. We’ve helped hundreds of small business owners understand the concept of perpetual existence and its implications on their business. If you’re ready to start your business, we make it easy with our Business Formation Services.
Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.