How Limited Is Your Liability?

The Concept of A Separate Legal Entity

A separate legal entity is a company that is created under law to have its own existence from the person who has created it.

A “separate legal entity” is a legal form that shields an individual from liability. When a business is deemed separate from its owner, the owner has limited liability for business debts and obligations.

In business law, a separate legal entity is an independent legal person, created and governed by laws and regulations that apply only to it, as opposed to a natural person or a government entity.

A corporation that is treated as a separate legal entity has its own rights and liabilities and enters into contracts in its own name. It can declare bankruptcy, amass debt, and hire employees. This does not impute legal liability to the corporation’s shareholders for any debts or actions taken by the company.

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