Separate legal entity

Hi there! Do you know what a group of people is? For example, a group of friends who likes to play together. Imagine if this group of friends decided to form a team to join a soccer competition.

Now, when you are part of a team, you are not just playing as an individual anymore. You are representing the whole team. Just like how your fingers work together to form a fist, your team members work together to achieve a common goal. They are like one big entity.

Similarly, when a group of people decides to start a business, they become a separate legal entity. This means that the business is considered a separate person, different from the people who started it.

So, imagine that the soccer team was a business. It would have its own name, its own money (like a bank account), and it could even sign contracts on its own. It would be like a new person who can do things on its own, without depending on the individual team members.

This is important because it helps protect the team (or business) and its members. If someone tries to sue the business or take legal action against it, it won't affect the individual team members. This is because the business is considered a separate legal entity, just like an imaginary friend.

So, to sum it up, a separate legal entity is like an imaginary friend that a group of people creates when they start a business. It has its own name, money, and can do things on its own. It's like a shield that protects the team or business, so that if something goes wrong, it won't affect the people who started the business.