Company as a Separate Legal Entity

BOQ then agreed to lend Success money to pay out its existing facilities secured by mortgages over properties, and the plaintiffs signed a deed of consent where the parties agreed that the guarantees originally provided to Statewest operated in respect of the BOQ loan. Success defaulted on the BOQ loan. The mortgage property was sold, with a shortfall of over $2,000,000. The plaintiffs commenced proceedings, and (among other things) sought a declaration that the defendant was not entitled to payment under guarantees.

LIABILITY – There is no separation between the individual and the business. As the owner and operator of a sole proprietorship, all of the profit and loss is the personal responsibility of the business owner creating unlimited liability.

Sole Proprietorship: A type of business that is owned by and run by one person with no legal difference between the business and the owner. It is easy to form with no cost or time to initiate. It gives the owner the ability to self-govern the business. There are drawbacks; only one owner can be established not allowing a partner. Also, unlimited liability puts the owner’s personal assets in jeopardy with the creditors.

A corporation is a legal entity designed to shield its owners from liability claims brought against it, as long as they maintain a separation from the entity (Legal-Dictionary.com, 2015). The co-mingling of Drizins’ personal funds into

Cordeaux Gabelle is still claiming damages of 14.6m even though I argued that section 11 of Securities Act 1993 is not relevant in this case, because the company was sold privately and not by public offering. I supported my argument by Supreme Court ´s decision in Gustafson v. Alloyd Co.

Salomon v Salomon and Co. Ltd (1897) AC 22 - when Aron Salomon sold his business to Salomon and Co. Ltd. Company, where he was still the major shareholder and some of his family was also a member. He also received a debenture as part of the payment for a secured term. But when the company has gone into liquidation during the 1890’s some argued that his

After the creation of a business plan, the next step to operating a business is the selection of an appropriate business structure. Different legal forms of business ownerships affect different managerial and financial factors from the business names to the tax obligations (Gregory, n.d.). The most common forms are sole proprietorship, partnership, cooperatives, and corporations. There are different types of corporations in the business world, but the two most general corporation types are S Corporation and Limited Liability Company (LLC) (Ferrell et al., 2013). The sole proprietorship is the easiest and most basic form of business ownership. It is owned and run by one individual, which is the proprietor. The individual is entitled to all profits and is responsible for all the business’s

Salamon v. Salamon & Co. Ltd has a significance principle that has been recognised universally. Refer to s16(5) in The Act, once company is registered, the new company is a juristic person that separate from its members. Likewise, company has the full responsible on its own debts and contractual

A Corporation or LLC allows the individual to become a separate entity from the Corporation. Many business owners and entrepreneur enter a partnership or corporation to protect their personal assets. This is especially important when you are in the business to expand the business and market the product/service. The corporate veil is defined as “a situation in which courts put aside limited liability and hold a corporation 's shareholders or directors personally liable for the corporation 's actions or debts” (LII, n.d.). There is an invisible shield that the “veil” separates the corporate entity and provides protection for the people (directors, shareholders, etc.) also known as the “alter ego”, and keeps them covered from personal liability behind the

The concept of a company being a separate legal entity is the most striking illustration in separating the company from its owners. A paramount principle of corporate law is that no shareholder or member of a company is made liable for the obligations incurred by such incorporations A company is different from its members in the eyes of law. In continuations to this the opposite also holds true in the sense that neither can the company be held liable for the acts of its members. It is a fundamental distinction that a company is distinct from its members.

There are a number of forms of ownership that the business can take. The main forms are sole proprietorship, partnership, Limited Liability Corporation, corporation and S corporation. There are advantages and disadvantages to each of these forms that will be discussed in this section. A sole proprietorship essentially has the person as the business. In this situation, the proprietor bears all of the risk involved in the business. Business income flows through to the proprietor's personal taxes. For some individuals there are tax advantages, but for many the appeal of the sole proprietorship is its simplicity. The IRS defines a partnership as a relationship existing between two or more individuals who joint to carry on a business. Partners divide income according to their own agreement and that income flows through to their personal taxes. Partners also have a high level of liability for any legal action that befalls the company.

They suggested that Salomon setting up a company was just a cover so that he could continue to run his business by himself but be covered by limited liability and that Salomon was liable for the debts to the unsecured creditors.

Salomon claimed that the amount from the assets sold and bank balance was his, as he also owned debentures in the company worth 9,000, which made the company liable to pay him back the remaining amount. After this action the creditors of the company were afraid that the company would not pay them back. The creditors resisted Salomon’s action to claim the rest of the money by filling a lawsuit against him that the balance of money available is owed to them rather than him as he is considered the owner of the company and should be accounted for the liquidation and pay them back from his own money if the balance from the company was not enough.

Salomon transferred the debentures to Broderip in exchange for a loan. Salomon defaulted on payment of interest on the loan and Broderip sought to enforce the security against the company. Unsecured creditors tried to put

This doctrine has been seen as a “two- edged sword,” reason being that at a general level while it was seen as a good decision in that by establishing that corporations are separate legal entities, Salomon 's case endowed the company with the entire requisite attributes with which to become the powerhouse of capitalism. At a particular level, however, it was a bad decision. By extending the benefits of incorporation to small private enterprises, Salomon 's case has promoted fraud and the evasion of legal obligations.