Characteristics of a Corporation

There are several existing definitions of a corporation. In Britain, corporation traditionally refers to a body corporate which can come in two forms: as a corporation sole which is the term used to mean an office managed by a person legally set apart from that person or as a corporation aggregate which involves more than one person holding an office. The meaning of the word corporation in America, is also presently adopted as its International definition, refers to a body corporate whose purpose of formation is to carry out business. This definition of corporation is expounded in the proceeding part of this article.

Corporations came about as a result of the corporation law. Their regulations consider the interests of the different people who take part in its existence such as the management who is in charge of the management of the corporation, creditors who lend corporations commodities, services or cash. Then there are also the stockholders who invest their money and the employees who render their work. It is apparent that it takes the cooperation and coordination of several people in order for a corporation to become productive in terms of value and profit. During the recent years, the role of corporations in the economic aspect has greatly amplified. It has become a source of livelihood for people, as well as a source for commodities and services. It also contributes to the worth of pensions play a big part for the progress of economies and the growth of society.

What is characteristic of a corporation is its independence from its founders and managements as provided in the law. If ever a corporation falls short, the stockholders lose their investment and employees will become jobless. Even when stockholders have not completely paid their shares, the unresolved amount will also be lost in the case of a No Accountability Company. However none on these two groups will have any obligation to pay the remaining credits owed by the corporation except if the constituents have independently given personal guarantees. This statute is coined as limited liability which also explains why corporations in UK have names ending in “Ltd.,” “Inc.” and “plc.”

Although corporations are not natural people, however, the law provides them with privileges and responsibilities like real people. Corporations are capable of applying human rights to actual people and the country; likewise, it is also capable of making violations against these rights.

They exist because of its constituents who possess certificates of incorporation and they can also cease when they ran out of money and reach bankruptcy. Like real people, they can even be charged of criminal faults such as fraud and homicide.

There are five common distinctiveness of contemporary corporations as described by two Professors from the University of Harvard:

1. The corporation is controlled and managed by a board of directors. This is also called delegated management.
2. Stockholders have a restricted accountability in the company so that in case of bankruptcy, they are only liable to pay the amount they pledged for in shares.
3. Stockholders own the company, also called, investor ownership
4. The company is an independent body in the legal aspect. It can be sued and can also sue using its own name.
5. Shares are movable commonly based on a list of exchange

The process of gaining ownership of a company has become complicated because of the varying opinions from different sectors who want to get involved in corporate matters. There is a system practiced dominantly in non – English speaking developed countries. Company boards have separate representatives for the stockholders and laborers to ascertain suitable strategies in a corporation.

There have been appeals from consumers, people active in environment and human rights protection towards corporations to have greater social responsibility. This is why major companies have codes of conduct to answer to their appeals. English – speaking countries like Australia, UK and the United States, have not incorporated these regulations in the corporate law, however it is being considered and there is still a continuous study on corporate governance and corporate finance.

Incorporating in the US

Incorporating in US has legal implications an organization planning to apply should know. Below are the steps that can guide any organization to prepare for the incorporation process:

The organization need to prepare a comprehensive Articles of Incorporation complete with the location of the business, the investor’s name with the corresponding type and amount of shares of stock owned or purchased, and a list of the purpose of the incorporation including a description of the responsibility of each officer in the corporation. The Articles of Incorporation other popular terms are Charter, Letters Patent, or Certificate of Incorporation. The state may charge a filing fee of $25 to $1,000 depending on the size of the corporation and its industry. The practice of the US state law is to include a distinctive name after the corporation’s name that acts as the corporation’s descriptive element as such as Inc., Ltd., LLC., or Corp.

The law normally defines the type of corporation through its corporate name called as distinctive element, legal ending, and descriptive element, which constitute the full corporate name. Although the law allows corporations not to have a descriptive element, corporations may find putting a descriptive name at the end of their corporate name more of a benefit as it connotes legal business registration, which is common practice to their industry and of the US business world as well as common knowledge to the US market. These sample descriptive elements “Tiger Computers Inc.” and “Tiger Computers Corp.” indicate that the organization officially registered itself as a corporation and not any other form of business registration.

Tiger refers to the distinctive element, the name that sets any organization apart from the other business names. Computers refer to the descriptive element or the type of industry or niche product the company operates or sells. Inc. or Corp. is the US state law legal ending that shows the owners or shareholders of the organization legally filed and registered the business entity as a corporation in their state. The US states considers the terms and abbreviations for Inc. as an abbreviation for Incorporated, Ltd. as an abbreviation for Limited, and Corp. as an abbreviation for Corporation as the most common forms of legal ending.

Corporate By-Laws come with the filing of the Articles of Incorporation. The state requires By-Law filing that outlines and details the annual meetings for the stockholders, voting power, and manner of notification the corporation implements whenever the need for a special conference or stockholder arise during the course of its operations.

FORMING A BUSINESS
When starting a new business, one of the first difficult choices that you have to make is how to structure that business. Do you create an LLC? Would it be more beneficial to create a corporation, either a C Corp or S Corp? Should my business be a partnership or sole proprietorship? The answer to this question will depend on many things: how big is your business going to be? How many owners are there? Before doing making a decision on what type of business entity to create, be sure to be thorough in asking yourself and any business partners these questions and more. It is an important step in getting your business formed in the correct way, right from the start! Once you know which way you want to structure your business you can use a service to make the process easier, such as Nevada Incorporation Services.

We will go into more detail into each option, but for now, here is a list of your options again:

Sole Proprietorship

Corporations: S Corp or C Corp

General Partnership

Limited Liability Company

Limited Liability Partnership

Determining which business entity works for your business is a difficult task. Each entity comes with its own different structure as well, for example, tax status and structure, operation of business, and different levels of assumed personal liability. On this website, we will go into detail on the following three entity types: Sole Proprietorship, Corporations (S Corp and C Corp) and Limited Liability Company.