What is Corporation?
A corporation is a legal entity recognized by the state as having separate legal attributes from the individual members of the corporation. Early corporations were established through charter. However, most jurisdictions today allow the formation of new corporations either through statutory registration or through incorporation. In this article, we’ll discuss what is corporation, what it’s important for businesses to understand about it, and how it relates to other entities such as limited liability and ownership.
A corporation is a legal entity that exists for the benefit of its investors. Businesses are created in order to provide a higher return to investors by avoiding personal liabilities that might be brought against them if the business were an individual enterprise. Corporations must follow certain rules regarding meetings and voting, as well as pay certain taxes, although these may vary from jurisdiction to jurisdiction. In Canada, for example, all corporations are required to have their books of accounts and to file financial statements with the Canadian authorities.
A corporation is created by incorporating. This involves filing Articles of Organization with the applicable provincial government, which grants permission for the corporation to transact business and carry on its business affairs. The Articles of Organization establish the name of the corporation, its purpose, its voting or share ownership structure and its duration. The corporation also names the director of the corporation, who is responsible for the management and operation of the business.
There are several things to keep in mind when you decide to incorporate a business entity. First of all, what is corporation requires the incorporation of a legal entity. Second, although a corporation is considered to be a separate entity from its owners, it actually forms one of many joint-venture or multistate businesses that exist between different entities or individuals. In the corporate form of incorporation, the shareholders are often one business unit rather than an assortment of individuals. This means that there are often more shares issued than in the case of sole proprietorships or partnerships.
What is corporation further requires the formulation of a Board of Directors, which is a 15-person body that meets continuously for the purpose of carrying out the business of the corporation. The officers of the corporation are called its directors. The primary responsibility of the board is to exercise the powers conferred upon it by the law. They must also act in behalf of the corporation and to oversee the management and operations of the business entity. In some instances, the corporation may conduct business even when there are no or few shareholders. This is called indirect control.
The officers of a corporation are also responsible for determining the nature and number of shares that will be issued and who will own them. The use of the term ‘owner’ in this context is meant to refer to those holders of the corporate stock who are entitled to voting power and who have the right to control the corporation. A corporation may have one director and one shareholder. It may also have one hundred or five or ten different directors and shareholders.
Once a business entity is incorporated, it continues in existence without any formalities until it is either dissolved or merged with another company. When a corporation is incorporated, the process is referred to as ‘incorporation’ and there are several reasons for incorporating a business entity. Some of these reasons include the prevention of double taxation, the avoidance of double taxation on corporate income by transferring the tax liability from federal government entities such as the Internal Revenue Service to the business entity, and the prevention of double regulation, which refers to the overlap of various laws, rules, regulations and standards which may apply to the business entity, its directors, and its employees. Incorporation may also be used to protect investors and stockholders from fraud and other harmful actions by the business entity and its directors and officers. Incorporation is a legal formalities, which happens after a complete written agreement is executed between all concerned parties.
All states and counties have their own corporate laws that dictate what is corporation and what is not. In many instances, counties will use a hybrid form of incorporation which combines some elements of both what is corporation and limited liability. Other countries, such as Canada, may also have variations of what is corporation but their jurisdictions usually remain very similar to the United States. Each state has its own laws on incorporation, but for the most part, what is corporation remains unchanged from state to state. Corporations are important for any business as it gives the company a legal identity, separates the business from its owners and allows the business owner to limit personal liability.