The Positive Attributes Of A Corporation

A legal entity which is distinct from its owners is a corporation. This type of business entity is composed of many individuals contributing properties and talents for capitalization and formation.

The definition of corporation is broader than other types of business organizations. It is mostly regarded as an artificial entity. It has the privileges and rights to acquire properties and to secure a loan. It can enter into a contract, can possess assets and can hire employees. It can exercise political rights and can enjoy immunity. It has the right to sue and vise versa. It can have the capacity similar to an individual, technically defining it as a juristic person. However, because it is an artificial entity, it only exists by name which is legalized through registration from the government or appropriate agency.

A corporation is a legal entity and thus, it is regulated by a legal jurisdiction. It has been deemed to be heavily regulated by the government that has jurisdiction over it than other types of organizations.

The dominant type of this type of entity is the modern business corporation. Aside from the aforementioned attributes of a corporation, this type has other legal characteristics which include transferable shares, the capacity of perpetual succession and limited liability.

Shareholders are individuals or entities that have owning rights in a corporation. They can have the privilege to sell their shares and purchase new ones from the same corporation without affecting the status of the entity. Moreover, the shares of the deceased shareholder can be succeeded by the heirs. Even if one shareholder is dead, the entity continues to exist. This makes it different from sole proprietorship and partnership which is prone to immediate dissolution whenever the owner or one of the partners is dead or wishes to resign his shares from the partnership.

Another attribute of a corporation is limited liability. A corporation has the legal right to obtain borrowing from other entities particularly financial companies. Because of its distinction from its owners, its creditors can demand payment during bankruptcy only to the entity and not to its owners. This characteristic is an advantage to share

owners whose rights and privileges are enjoyed by means of profit participation, dividends received and shares of stock appreciation except accountability to the liabilities of the entity. This is the case of a for-profit stock corporation.

The perpetual lifetime is another positive attribute in a corporation. This characteristic allows the entity to attain stability even if there is a new shareholder or a dead one during its lifetime. In some jurisdictions, the life of a corporation can last for several periods where it is possible to apply for renewal to extend its life span.

The ownership of a corporation depends on its type. Stock corporation is mostly composed of shareholders who have voting rights and profit participation over the entity. Shareholders are also called stockholders. In non-stock corporation, they are called members. Members have the voting right on the operation of a corporate entity. A non-stock corporation is mostly operated not-for profit. Though rare, it is possible for non-stock corporation to operate for profit.

When it comes to control and governance of a corporation, the board of directors is the group of individuals responsible for it. This group which is made up of stockholders is elected by the shareholders. The persons in the board of directors are responsible for appointing or electing the titled officers of the corporation such as the president, secretary and treasurer. In not-for-profit corporation, the term is board of trustees.

Corporation is formed mostly by entrepreneurs and investors for profit. Nevertheless, this kind of entity can also be created by the government and religious persons and for political or charitable purposes. Corporations created for charity are non-profit corporation. Entities formed by investors and businessman are called business corporations.

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