Are You a Legal Professional?

What Does it Mean that Corporations Have "Perpetual Existence"?

The technical definition of a "corporation" is "an artificial creation of the law existing as a voluntary chartered association of individuals that has most of the rights and duties of natural persons but with perpetual existence and limited liability." In other words, a corporation exists as a separate legal structure, almost as if it were a person under the law.

Corporate Formation: A Beginning, With or Without an End

The organizers of a corporation can decide to give the corporation an end date so that when the corporation's mission is complete, it automatically ends. Alternatively, the organizers could decide not to specify an end date. When this happens the corporation exists until its owners, the shareholders, decide to end it. For this reason, such a corporation is considered to have perpetual or ever-lasting existence.

Reasons for Perpetual Existence of Companies

Having perpetual existence has numerous benefits for a corporation. In order to survive, many corporations need investors to fund the corporation's endeavors. If a corporation has perpetual existence, the corporation will continue even if the shareholders, directors, and officers come and go. This means the corporation is a safer, more stable place for investors to put their money and raises the chances that the investors will see a return on their money.

The other benefit to perpetual existence is that it allows the corporation's directors to create a long term plan for profit growth, since they can be sure the corporation will still be there long into the future. This satisfies shareholders because they are assured they will have long term gain, and it helps the corporation's customers because the corporation has the chance to innovate on new products, respond to customer feedback, and build on its expertise.

Finally, perpetual existence benefits the corporation because there is no need to constantly file all the documents that started the organization. Instead, it can carry information from year to year so valuable time and effort will not be wasted duplicating effort.

Next Steps
Contact a qualified business organizations attorney to help you
choose the best formation for your business.
(e.g., Chicago, IL or 60611)

Help Me Find a Do-It-Yourself Solution