The Basics of a Corporation
At its core, a corporation is essentially a legal entity with an identity independent from that of its constituent members. In simpler terms, a corporation is an organization which has legal rights and responsibilities separate from its owners. This means that a corporation can sue and be sued; can buy, sell, and own property; to hire employees or agents; and to enter into legal agreements and contracts. In this sense, a corporation has rights similar to those of an individual person.
In most countries, corporations are generally owned by members called stock or shareholders. These members have ownership interest in the corporation proportional to the amount of shares they possess, and have the right to vote on issues facing the corporation. The shareholders are the ones who elect the board of directors, a panel which runs and manages the business. The board of directors includes such roles as the president, the treasurer, the CEO, and so on.
There are several benefits enjoyed by corporations and their members. First of all, the shareholders or stockholders of a corporation enjoy liability protection. Because the corporation is a separate and independent legal entity, any liabilities or penalties incurred are not passed on to the shareholders in excess of the shareholder’s investment in the company.
Secondly, the identity and existence of a corporation is not tied to any particular person, whether that person be a shareholder, director, or other employee. This allows the corporation to persist and continue to accumulate assets even after its “original” members are gone. It also empowers the corporation to undertake long-term projects which would be otherwise impossible.
To learn more about corporations and other business structures, contact the staff of Texas Legal Entities or visit www.texaslegalentities.com.
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