...................................1 Importance of separate legal entity..........................................................2 Lifting veil of corporation.........................................................................4 Conclusion..................................................................................................7 References..................................................................................................8 Introduction In Malaysia, the legislation governing the formation and operation of companies is the Companies Act 1965. Section 14(1) of the Companies Act 1965 states that company are incorporated under the law which begins with the two or more people association as they use their names to become the subscriber in memorandum and all requirement of the registration are complied. Hence, then the company is formed, then it’s called “incorporated”. After being issued with a certificate of incorporation, a company has a legal status separate from the members. In law, the company is treated as a person. Whatever happen in the company, the members of the company should not receive any impact as it was distinguished from company. Wrong done to the company may be vindicated by the company. The most important decision ever made by the English courts in relation to separate legal entity was adopted in the case of Salomon v Salomon[1897] and also accepted in Malaysian company law. In this case, Salomon was sole proprietor who runs the...
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...GM520 Professor: ABCD Introduction A corporation is a legal entity that is created under the laws of a state designed to establish the entity as a separate legal entity having its own privileges and liabilities distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter (i.e. by an ad hoc act passed by a parliament or legislature). Most jurisdictions now allow the creation of new corporations through registration. An important (but not universal) contemporary feature of a corporation is limited liability. If a corporation fails, shareholders normally only stand to lose their investment and employees will lose their jobs, but neither will be further liable for debts that remain owing to the corporation's creditors. Sole- Proprietorship A business structure in which an individual and his/her company is considered a single entity for tax and liability purposes. A sole proprietorship is a company which is not registered with the state as a limited liability company or corporation. The owner does not pay income tax separately for the company, but he/she reports business income or losses on his/her individual income tax return. The owner is inseparable from the sole proprietorship, so he/she is liable for any business debts also called proprietorship. A business can be set up in a variety of ways, ranging from a sole-proprietorship to a general partnership...
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...business organization would best suit your unique product or service. Consider legal, tax, accounting, and other implications when selecting from the four business types. Write a paper of no more than 1,250 words discussing your small-business idea. Include the following: The advantages and disadvantages of the different forms of business organization, which include the following: Sole proprietorship Partnership C corporation S corporation The different types of financial statements required by law with each form of business organization, including different names for the equity sections. This does not mean an overview of what is on each statement. What entities are required by law to have statements and what is the difference in the equity? The following consequences associated with each form of business organization: Tax implications Legal implications Accounting implications, such as SOX, GAAP and FASB An explanation of the unique product or service your small business provides Your choice of business organization form for your new business Your rationale for choosing this form of business organization For tax implications for each entity, your book only says that some entities have advantages. Do some research to determine what the tax advantages and disadvantages are for each. Legal implications refers to liability and continuity of the entity in the event of death or the withdrawal of a partner,owner or shareholder...
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...Introduction: The three basic legal forms of businesses in the United States are Sole Proprietorships, Partnerships, and Corporations. However, each of these forms can have variations and a hybrid called a limited liability company can be formed in all US States that exhibit the characteristics of both a partnership and a corporation (American College, n.d.). The following are some of the forms of business existing in the United States and their characteristics: a. Sole proprietorship b. General partnership c. Limited partnership d. C-corporation e. S-corporation f. Limited Liability Company This report contains an overview of some of the forms of business organizations that exist in the United States. Because of the federal system of the U.S., the many forms of business organizations are subject to the laws and regulations of the state where they operate or are registered. Both federal and state taxes are also taken into account by business owners and financial advisors in the choice of the business form (Perez, 2009). Liability, tax consequences, and legal implications are generally the most important actors business owners consider when choosing a business form. a) Sole Proprietorship The most basic of the forms of business organization is the sole proprietorship where the business is owned by a single person. There are more registered sole proprietorships in the U.S. than the other forms of business. In addition...
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...proprietor. With that stated, the losses are also those of the sole proprietor. Since there is no separation in the legal entity between the proprietor and the business, all personal assets become attached to the debt of the business. Another disadvantage can come at the time, or untimely of death of the proprietor. There is no automatic continuation of the business. The business becomes part of the owner’s estate and can become subject to probate and “death tax”. • Liability- You risk everything, there is no legal separation between the business and the individual owner. The owner risks all assets, home, car, everything in his/her name. Unlike a corporation, sole proprietorships have unlimited liability and the proprietor is legally responsible for all debts. • Income Taxes- All business related income or losses must be reported on the owner’s personal income tax return. The business is not separately taxed. Deductions are allowed for business expenses in the same manner as any other type of business. The owner is paid simply by making draws on the business’s checking account. At the end of the year all assets and liabilities belong to the owner, and all income and expenses for the tax year is “Pass-through” to the owner. • Longevity/Continuity- The concern here is that, if the owner fails to take appropriate legal actions, the business will automatically shut down upon his/her...
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...Sole Proprietorship The sole proprietorship is the simplest business form under which one can operate a business. The sole proprietorship is not a legal entity. It simply refers to a person who owns the business and is personally responsible for its debts. A sole proprietorship can operate under the name of its owner or it can do business under a fictitious name, The fictitious name is simply a trade name--it does not create a legal entity separate from the sole proprietor owner. Formation The simplest and most basic form of a sole proprietorship usually requires little to no formalities. Without the official formation of a separate and new entity, such as a corporation, the legal name of your business is the same as your own name, since essentially you are the entire business. The products or services you sell to the public affect your own personal income and taxes. This is the easiest way to start and operate a business. When people pay the business, they pay you directly. Advantages A sole proprietor has complete control and decision-making power over the business. Sale or transfer can take place at the discretion of the sole proprietor. Minimal legal costs to forming a sole proprietorship Few formal business requirements No corporate tax payments Another advantage of forming a sole proprietorship is the taxation rules established by the Internal Revenue Service. Sole proprietors are not required to file separate tax returns for their business. Income made from the business...
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...| The Criteria That Determine Sole Proprietorships | Not all corporations started as a corporate entity. Many businesses start out small with one owner. They are known as sole proprietorships, the simplest and most widespread form of business formation in the United States. Certain criteria are used to determine sole proprietorship status. A sole proprietorship: * is owned by a single individual When you are planning to do business with a sole proprietorship, bear in mind that since a single individual owns a sole proprietorship, one person makes all the decisions and does not have to contend with a legal department to approve contracts. The owner can only use personal funds, although he may have separate savings and checking accounts for the business. Also, it may be difficult for a sole proprietor to obtain loans so money may be tight. If a sole proprietor were to die, the business would probably end. * is not legally differentiated from the owner and is not usually required to register as a business A sole proprietor is not legally differentiated from the business, regardless of whether the business bears his name or a fictitious name, and does not have to meet many requirements to start a business. Since the business is not considered a legal entity, it is the owner who is sued rather than the business. * must be registered as a business if it operates under a fictitious name A sole proprietorship operating under a name other than the name of the owner is...
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...Sole proprietorship The sole proprietorship is the simplest form of business entity. Single person carrying on a business for profit. The sole proprietorship is the simplest business form under which one can operate a business. The sole proprietorship is not a legal entity. The sole proprietorship is a popular business form due to its simplicity, ease of setup, and nominal cost. A sole proprietor need only register his or her name and secure local licenses, and the sole proprietor is ready for business beginning and ending the business venture are uncomplicated steps requiring little more than the decision of the sole proprietor This can be an advantage, especially when the proprietor is not certain whether he or she will wish to continue the venture for any significant length of time and thus is unwilling to spend much money on filings, legal drafting, and the like. Disadvantages: The sole proprietorship does not have any legal existence separate from that of its owner. It also removes any shield from liability that might otherwise protect the proprietor. Thus, the proprietor is personally liable for all obligations of the business Partnership In contrast to general partnership law, a limited partnership is not dissolved by the death of a limited partner, and a limited partner may not compel dissolution of the partnership absent contrary provisions in the partnership agreement partners in general partnerships are jointly and severally liable for all obligations...
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...Law 531/ Business Law Legal Forms of Business As an entrepreneur one of the most important decision to make, when starting a business is the legal form of the business. In making this decision many factors are taken into consideration, such as financial resource for business, government rules and regulation, and personal liability. In this paper a discussion regarding the different forms of business including scenarios of these form and explanation on why this corresponding business form is preferred. Sole Proprietorship According to Cheeseman (2010), a sole proprieship is the simplest form of business organization and there is no separate legal entity. (p. 530). Under sole proprietorship the business is owned and executed by a single person. The proprietor makes all the management decisions and has authority to receive profits. Sole proprietorship business could easily be sold or transferred if the owner choose, no other approval is necessary. Scenario: A small neighborhood businesses, sometimes called, neighborhood store, are an example of sole proprietorship. Creating a sole proprietorship is easy and low cost with no government approval is required at the federal and state level. A license to do business within the city is required at the state level. This form of business is excellent for a person with limited amount of money to start a small business, Sole proprietorship is responsible for business’s contract and torts committed, The sole proprietorship has...
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...whatsoever, Supreme or local authority, Public Body, Government Department Official, Association, Notary Bank, Firm, Corporation or Company public or private or any person and enter into negotiations and conclude or modify or cancel and sign or execute any contract or arrangement with any such authorities or persons, as aforesaid and to apply to authorities and effect negotiations and transactions as required; * To communicate, negotiate, sign, conclude, extend and implement any agreements, to apply for and obtain all necessary documents or copies, statements, certificates, conclusions and other data from all individuals of a public administration entity (state or municipal institutions, agency, official, civil servant or other individual or legal entity obliged by law to perform public administration) to a higher public administration entity, and to represent the Company while such appeals are in progress; * To manage, operate, terminate, use and dispose with any of the accounts opened or owned by Company, including accounts existing in any bank,...
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...MERITS OF CORPORATE PERSONALITY A corporate person (s) is a separate legal business entity created under state laws by an owner or group of owners who become initial shareholders. According to Sec. 3 (1) (ii) of the Companies Act, 1956; a company means a business entity formed and registered under the Companies Act, 1956 or any of the preceding Acts. A Company comes into existence only by registration under the Act, which can be termed as incorporation. Thus, a company is a legal person. The primary advantage of a corporate form of business is that a corporation is a stand-alone entity, which means you are not personally liable for the assets and debts of the business. Incorporating protects your personal assets from lawsuits, debt collection and other business issues that can arise. Other merits of a corporate personality are as follows: 1) Independent corporate existence- the outstanding feature of a company is its independent corporate existence. By registration under the Companies Act, a company becomes vested with corporate personality, which is independent of, and distinct from its members. A company is a legal person. The decision of the House of Lords in Salomon v. Salomon & Co. Ltd. (1897 AC 22) is an authority on this principle: It was argued on behalf of the unsecured creditors that, though the co was incorporated, it never had an independent existence. It was S himself trading under another name, but the House of Lords held Salomon & Co. Ltd. must...
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...business organization. Here there is only one owner of the business and no separate legal entity. The next form of business is a general partnership, or ordinary partnership. A general partnership is an association of two or more persons to carry on as co-owners of a business for profit. Here there are general partners, who are liable for the company and have equal say. Another form of business is a limited partnership, which is also known as a special partnership. Limited partnerships are used for different business ventures including investing in real estate, drilling oil and gas wells, investing in movie productions, and more. In this form, there are two possible types of partners: general partners and limited partners. General partners contribute capital, are liable, and are involved in the management. Limited partners contribute capital, however they are not liable for the company and are not involved in the management. A limited liability corporation (LLC) is an unincorporated business entity that combines the most favorable aspects of general partnerships, limited partnerships, and corporations. An LLC operates under state law, not federal law. A limited liability partnership (LLP) is a special form of partnership in which all partners are limited partners, and there are no general partners. The last type of business form is a corporation, which is a fictitious legal entity that is created according to...
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...Assignment Topic “The Company at Law is Distinct from its Members. Directors are neither Agents nor Trustees of the Company” Prepared For Barrister Shaheen Ahmed Lecturer School of Business North South University Prepared By Shahriar Hasnaine Sakib ID- 111 0261 030 LAW 200 Section: 07 Date of Submission July 15, 2014 Contents TABLE OF CONTENTS Objective 3 Introduction 3 Company’s Classification and Characteristics 3 Separate legal personality 4 Consequences of treating the company as a separate legal entity: 5 Company has a Distinct Entity from its Members 6 Agent & Trustee 6 Directors 6 Analysis to the Leading Cases 7 Salomon v. Salomon & Co. 7 Lee and Lee’s Air Farm’s Ltd 8 Macaura v. Northern Assurance Co Ltd 8 DHN v Tower Hamlets London Borough Council 9 Lubbe v Cape Plc [2000] 9 Some Other Famous Cases: 10 Paul v. Virginia (1869) 10 Berkey v. Third Avenue Railway Co 10 Adams v Cape Industries plc [1990] 10 Walkovszky v. Carlton 10 Findings 11 Conclusion 11 Bibliography 12 Objective ‘’A company is distinct from its members. Directors are neither agents nor trustees of a company’’ The purpose of this Assignment is to analyze the legendary statement made by Lord Mac Naughton during the Salomon vs Salomon case on corporate personality, in the lights of some leading cases. The statement of Lord Mac Naughton was “The Company is at law a different person altogether from its members, the company is not in law agent of the subscribers or...
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...business. Another disadvantage is that the business and the owner are not separate beings (Cheeseman, 2013). A business organization that is owned by two or more individuals is a partnership. The advantages to a having a business partnership are that there is more capital put into the business and that the obligations and debts are shared among each partner. Individuals who are part of a partnership can also deduct their losses through their personal income tax. There are a few disadvantages to being part of a partnership are that all profits are shared and that all decisions need to be made by each partner (Cheeseman, 2013). A C Corporation is any corporation that is taxed separately from its owners. Corporations are a “separate legal entity (or legal person) for most purposes" (Cheeseman, 2013, p. 594). The advantages of a corporation are that it can have more than 75 shareholders that allow for growth of the business, and the business does not dissolve due to the death of the owner. The disadvantage to having a corporation is that there is double taxation, and this means that the business is taxed as well as the shareholders. A small domestic corporation...
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...Introduction According to Salomon v Salomon& Co Ltd , the fundamental attribute of separate legal entity is that the company is regarded as a legal person distinct from any and all of the individuals involved in the company by incorporation of a projected or existing enterprise. Under s15(1) of the Companies Act 2006, companies which are registered become incorporated and separate legal persons on registration. As a consequence of the existence of a distinct legal entity, a company has the capacity to be a party to a contract, sue or being sued, commit a crime, be the victim of a crime, hold property, and rationally, thus, make profits and losses that are its own rather than those of the shareholders of the company. The Principle of Separate Legal Personality The importance of the corporate personality which was created by statute in the first half of the nineteenth century was not fully appreciated until the well-known case of Salomon. This case firmly established the operation of the concept of the separate legal personality of a company under the Companies Act of 1862 and this principle is still existed in the Companies Act of 2006 today under the UK Company Law. The Salomon case makes it clear that it is possible for a sole trader owner to transfer a small business into a registered company and hence separate himself from the liabilities of the business. In this case, Salomon carried on a boot and shoe manufacturing business as a sole proprietor. In 1892, he registered...
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