What is meant by continuity of existence, and which forms generally offer it?

What is meant by continuity of existence, and which forms generally offer it?

• A. Continuity means the business continues despite changes in ownership; corporations and LLCs generally offer it.
• B. Continuity means the business ends after the owner's death; sole proprietorships offer it.
• C. Continuity means tax status persists; only partnerships offer it.
• D. Continuity means branding remains; only franchises offer it.

Answer: (A)

Continuity of existence means the business keeps existing even if ownership changes or the owner dies. This is built into the legal structure of the entity. Corporations and LLCs are separate legal entities, so ownership can change through transfers of shares or membership interests without dissolving the business. The entity keeps operating, filing, and obligations as before, regardless of who owns it at any given moment. In contrast, a sole proprietorship is legally the same person as the owner, so it ends when the owner dies or leaves, because there isn’t a separate entity to continue. Partnerships can continue if the partnership agreement provides for it, but without such terms they may dissolve when a partner dies or exits. Franchises relate to branding and contractual relationships, not the underlying continuity of the business entity itself, so they don’t inherently guarantee ongoing existence in the way corporations and LLCs do.

Continuity of existence means the business keeps existing even if ownership changes or the owner dies. This is built into the legal structure of the entity. Corporations and LLCs are separate legal entities, so ownership can change through transfers of shares or membership interests without dissolving the business. The entity keeps operating, filing, and obligations as before, regardless of who owns it at any given moment.

In contrast, a sole proprietorship is legally the same person as the owner, so it ends when the owner dies or leaves, because there isn’t a separate entity to continue. Partnerships can continue if the partnership agreement provides for it, but without such terms they may dissolve when a partner dies or exits. Franchises relate to branding and contractual relationships, not the underlying continuity of the business entity itself, so they don’t inherently guarantee ongoing existence in the way corporations and LLCs do.