Truth about Corporations and Corporate Law
What is a Corporation?
A corporation is a formal organization or business associated with a publicly registered charter. The registration recognizes the business entity as a separate legal entity. This structure allows the corporation to have its own privileges and distinct liabilities. A corporation is a fundamental aspect of a capitalistic society and a competitive market. Corporations typically provide a tangible good or service to a consumer base.
For the delivery of a unique service, the corporation will seek a profit (the delivery of finances) from the consumers who purchase their products or the investors who purchase shares of stock. Corporations are developed in accordance with corporate law. The rules established through this scope balance the interests of the operators, shareholders, creditors, and all employees associated with the corporation.
Corporations, in most instances, possess limited liability. If the corporation’s business model fails, the brunt of the financial loss is transferred over to the shareholders and employees of the entity—the shareholder’s investment in the corporation decreases proportionately with the entity’s struggles and the employees will most likely lose their jobs.
That being said, all liabilities associated with debts will be handled by the operators of the corporation. The Board of Directors will be forced to fulfill their loan requirements to the underlying creditors. A corporation is not recognized as a “natural person”. However, all corporations are legally awarded certain rights and responsibilities like natural persons. Corporations are able to exercise human rights against government entities, and they are often responsible for human rights violations.
A corporation possesses a hierarchy. There are employees who produce the particular good or service and a management team who is responsible for upholding the financial aspects of the business model. A corporation contains a centralized management team developed under a board structure. In general, there are four core characteristics of a corporation:
all corporations possess a legal personality,
a centralized management team, and
Within the classification of a “corporation” exist two broad categories: the corporation may be structured for-profit or as a not-for-profit entity. Most corporations develop a profit-based model which will seek a profit (income outweighs liabilities) through the delivery of a tangible item, good or service. A not-for-profit structure aims to produce a good or service that benefits society without incurring income for personal needs.
What is Corporate Law?
Corporate law is the scope of law that regulates the most dominant form of business enterprise. Corporate law balances the legal implications and rights for shareholders, creditors, employees, directors, and the broad consumer base. Corporate law attaches a legal personality to each corporation.
The right to sue and be sued is present through this characteristic. Corporate law, in essence, treats the business enterprise as a human being. Corporate law states that a corporation attaches a limited liability structure to the shareholders of a business entity. If the company goes insolvent, the shareholders will only owe or lose money based on their initial investment.
All corporations possess transferable shares—these shares can be purchased or sold on listed exchanges. The control of the business entity is placed in the hands of a Board of Directors.