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Perpetual Succession: The Cornerstone of Corporate Existence
Definition & meaning
Perpetual succession is a legal concept that allows a corporation to continue existing independently of its owners. This means that the corporation can operate indefinitely, even if its shareholders or members change over time. The primary goal of incorporating a business is to achieve this continuous existence, which distinguishes corporations from other business entities that may dissolve when ownership changes or members leave.
Table of content
Legal use & context
Perpetual succession is primarily used in corporate law. It establishes that a corporation remains intact despite changes in ownership or management. This concept is crucial in various legal contexts, including:
Business continuity planning
Transfer of ownership interests
Estate planning for shareholders
Users may find legal templates on platforms like US Legal Forms to assist with the incorporation process and related documentation.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A family-owned business incorporates as a corporation. Even if the original owners retire or pass away, the corporation continues to operate under the same name and business structure.
Example 2: A tech startup incorporates and raises funds through investors. As new investors come in and others exit, the corporation remains intact, allowing for ongoing operations and growth. (hypothetical example)
State-by-state differences
Examples of state differences (not exhaustive):
State
Notes on Perpetual Succession
California
Allows perpetual succession unless otherwise stated in the articles of incorporation.
Delaware
Commonly used for incorporation, Delaware law supports perpetual succession by default.
Texas
Perpetual succession is granted unless a limited duration is specified in the formation documents.
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
Comparison with related terms
Term
Definition
Key Differences
Limited Liability Company (LLC)
A business structure that offers limited liability to its owners.
LLCs may have a limited lifespan unless specified for perpetual existence.
Partnership
A business entity where two or more individuals share ownership.
Partnerships generally dissolve upon the departure of a partner unless otherwise agreed.
Common misunderstandings
What to do if this term applies to you
If you are considering forming a corporation, it's essential to understand the implications of perpetual succession. Here are steps you can take:
Consult with a legal professional to ensure you understand the requirements for incorporation in your state.
Explore US Legal Forms for templates that can help you with the incorporation process.
Consider how ownership transfers may affect your business and plan accordingly.
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