Question

Please explain in 175 words or more the question below.

Discuss how a business entity can evolve from one legal form to another?

Answer 1

Changing of business type requires registration of business with the state. The business accounts need0 to be closed out and contracts may also need to be changed. These type of business regulations are done by the state business divisions. There are processes including various documents to be filled while changing the type of business or the legal form of it.
Transfer of assets and liabilities of the business takes place. Many legalities are to be followed. There are different legal formalities to be fulfilled for different types of businesses. The various types of businesses are, sole proprietorship, partnership, LLP, corporation, etc. Each type of legal form of business has its own rule and regulations to be followed. The number of members, directors, shareholders, amount of capital to be invested, etc., have different limits for different types of businesses.
At the very initial level of the starting of the business, by default it becomes a sole proprietorship, when it comes to extending and growing the business further then the type of business needs to be changed according to the preferences. If the owner wants to change the business type to partnership then, the partnership agreement need to be signed between the partners, and the conditions to be a partnership firm need to be fulfilled. If the proprietor wants to change the business type to LLP or corporation, then the respective norms are to be considered.