BUSINESS LAW - Business Entities

Business Corporations

Cleverness In This Article

Introduction To Business Corporations

Publicly Held Corporations

Closed corporations

The two main types of a corporation

Corporation - Advantages

Corporation - Disadvantages

Introduction To Business Corporations

A corporation is a legal entity in its own right and is separate from the individuals working within or owning it. A corporation is considered to be a legal ‘person’. They can hold property in their own name and can sue and be sued.

Publicly Held Corporations

Publicly held corporations are owned by shareholders who elect a board of directors to oversee primary responsibilities. Shares are sold on the open market to investors as an investment and the shareholders have little interest in managing the business.

Closed corporations

These are generally owned by family members or people who know each other. Shares are not traded on the open market.

The two main types of a corporation

Standard, for-profit corporations
Charitable, not-for-profit corporations.

Any profits generated by a corporation are taxed as the “personal income” of the company. Any income distributed to the shareholders as dividends or profits are then taxed again as the personal income of the owners.

Corporation - Advantages

Limited liability for the owner to debts or losses.
Individual shareholder’s liability is generally limited to the value of their own stock in the corporation.
Personal assets cannot be seized to pay for business debts
The corporation is an entity of its own and does not end when ownership changes.
It is easier to raise capital through the sale of stock.
Profits and losses belong to the corporation
Can be transferred to new owners fairly easily
The cooperation has a legal status of its own.