Corporation Definition the Most Common Form Of

8/14/2019 Corporation Definition the Most Common Form Of

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corporation

Definition

The most common form ofbusinessorganization, and one which is chartered

by a state and given many legal rights as an entity separate from its owners.

This form of business is characterized by the limited liability of its owners,

the issuance ofshares of easily transferable stock, and existence as a going

concern. The process of becoming a corporation, call incorporation, gives the

company separate legalstanding from its owners and protects those owners

from being personally liable in the event that the company is sued (a

condition known as limited liability). Incorporation also provides companies

with a more flexible way to manage their ownershipstructure. In addition,

there are different taximplications for corporations, although these can be

both advantageous and disadvantageous. In these respects, corporations

differ from sole proprietorships and limited partnerships.

Corporation

From Wikipedia, the free encyclopedia

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This article is about business corporations. For other uses, see Corporation

(disambiguation).

A corporation is an institution that is granted acharterrecognizing it as aseparate legal entity

having its own privileges, and liabilities distinct from those of its members.[1] There are manydifferent forms of corporations, most of which are used to conductbusiness.
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Corporations exist as a product ofcorporate law, and their rules balance the interests of its

stakeholders: the managementwho operate the corporation;creditors who loan it goods, services

or money; shareholders who invest theircapital; the employees who contribute theirlabor; andthe clients they serve. People work together in corporations to produce value and generate

income. In modern times, corporations have become an increasingly dominant part of economic

life. People rely on corporations foremployment, pensions, goods, services, economic growthand cultural development.

An important feature of corporation is limited liability. If a corporation fails, shareholders

normally only stand to lose their investment, and employees will lose their jobs, but neither will

be further liable for debts that remain owing to the corporation's creditors.

Despite not being natural persons, corporations are recognized by the law to have rights andresponsibilities like actual people. Corporations can exercise human rights against real

individuals and the state,[2] and they may be responsible for human rights violations.[3] Just as

they are "born" into existence through its members obtaining a certificate of incorporation, they

can "die" when they lose money intoinsolvency. Corporations can even be convicted of criminaloffences, such as fraud andmanslaughter.[4]

Although corporate law varies in different jurisdictions, there are five core characteristics of the

business corporation:[5]

Legal personality Limited liability Transferable shares Centralized management under a board structure Shared ownership by contributors ofcapital.

[edit] History

Main articles: History of corporations andList of oldest companies

1/8 share of the Stora Kopparberg mine, dated June 16, 1288.
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The word "corporation" derives from corpus, the Latin word for body, or a "body of people".

Entities which carried on business and were the subjects of legal rights were found in ancient

Rome, and the Maurya Empirein ancient India.[6] In medieval Europe, churches becameincorporated, as did local governments, such as the Pope and the City of London Corporation.

The point was that the incorporation would survive longer than the lives of any particular

member, existing in perpetuity. The alleged oldest commercial corporation in the world, theStora Kopparberg mining community in Falun, Sweden, obtained a charterfrom King Magnus

Eriksson in 1347. Many European nations chartered corporations to lead colonial ventures, such

as the Dutch East India Company or theHudson's Bay Company, and these corporations came toplay a large part in the history ofcorporate colonialism.

During the period of colonial expansion in the seventeenth century, the true progenitors of the

modern Corporation emerged as the "chartered company". Acting under a charter sanctioned by

the Dutch monarch, the Vereenigde Oost-Indische Compagnie (VOC), or theDutch East IndiaCompany, defeated Portuguese forces and established itself in theMoluccan Islands in order to

profit from the European demand forspices. Investors in the VOC were issued paper certificates

as proof of share ownership, and were able to trade their shares on the original Amsterdamstockexchange. Shareholders are also explicitly granted limited liability in the company's royalcharter.[7] In the late eighteenth century, Stewart Kyd, the author of the first treatise oncorporate

law in English, defined a corporation as,

a collection of many individuals united into one body, under a special denomination,

having perpetual succession under an artificial form, and vested, by policy of the

law, with the capacity of acting, in several respects, as an individual, particularly of

taking and granting property, of contracting obligations, and of suing and being

sued, of enjoying privileges and immunities in common, and of exercising a variety

of political rights, more or less extensive, according to the design of its institution,

or the powers conferred upon it, either at the time of its creation, or at anysubsequent period of its existence.

[8]

[edit] Mercantilism

See also: Mercantilism andSouth Sea Bubble
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A bond issued by the Dutch East India Company, dating from 1623, for the amount

of 2,400 florins

Labelled by both contemporaries and historians as "the grandest society of merchants in the

universe", the British East India Company would come to symbolize the dazzlingly rich potentialof the corporation, as well as new methods of business that could be both brutal and exploitive.[9]

On 31 December 1600, the English monarchygranted the company a fifteen-year monopoly on

trade to and from the East Indies and Africa. By 1611, shareholders in the East India Companywere earning an almost 150%return on their investment. Subsequent stock offerings

demonstrated just how lucrative the Company had become. Its first stock offering in 1613-1616

raised 418,000, and its first offering in 1617-1622 raised 1.6 million. [10]

In the United States, government chartering began to fall out of vogue in the mid-1800s.Corporate law at the time was focused on protection of the public interest, and not on the

interests of corporate shareholders. Corporate charters were closely regulated by the states.

Forming a corporation usually required an act of legislature. Investors generally had to be givenan equal say in corporate governance, and corporations were required to comply with the

purposes expressed in their charters. Many private firms in the 19th century avoided the

corporate model for these reasons (Andrew Carnegie formed his steel operation as a limited

partnership, andJohn D. Rockefellerset up Standard Oil as a trust). Eventually, stategovernments began to realize the greater corporate registration revenues available by providing

more permissive corporate laws.New Jersey was the first state to adopt an "enabling" corporate

law, with the goal of attracting more business to the state.[11]Delaware followed, and soonbecame known as the most corporation-friendly state in the country after New Jersey raised taxes

on the corporations, driving them out. New Jersey reduced these taxes after this mistake was

realized, but by then it was too late; even today, most major public corporations are set up under

Delaware law.

By the beginning of the 19th century, government policy on both sides of the Atlantic began to

change, reflecting the growing popularity of the proposition that corporations were riding the

economic wave of the future. In 1819, the U.S. Supreme Court granted corporations a plethora ofrights they had not previously recognized or enjoyed.[12] Corporate charters were deemed

"inviolable", and not subject to arbitrary amendment or abolition by state governments.[13]The

Corporation as a whole was labeled an "artificial person," possessing both individuality andimmortality.[14]

At around the same time, British legislation was similarly freeing the corporation from the

shackles of historical restrictions. In 1844 the British Parliament passed the Joint StockCompanies Act, which allowed companies to incorporate without a royal charter or an Act ofParliament.[15] Ten years later, limited liability, the key provision of modern corporate law,

passed into English law: in response to increasing pressure from newly emerging capital

interests, Parliament passed the Limited Liability Act of 1855, which established the principle

that any corporation could enjoy limited legal liability on both contract and tort claims simply byregistering as a "limited" company with the appropriate government agency. [16]
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This prompted the English periodicalEconomistto write in 1855 that "never, perhaps, was a

change so vehemently and generally demanded, of which the importance was so much

overrated."[17] The glaring inaccuracy of the second part of this judgment was recognized by thesame magazine more than 75 years later, when it claimed that, "[t]he economic historian of the

future . . . may be inclined to assign to the nameless inventor of the principle of limited liability,

as applied to trading corporations, a place of honour withWatt and Stephenson, and otherpioneers of the Industrial Revolution."[18]

[edit] Modern corporations

By the end of the 19th century the forces of limited liability, state and national deregulation, and

vastly increasing capital markets had come together to give birth to the corporation in its

modern-day form.[19] The well-known Santa Clara County v. Southern Pacific Railroaddecisionbegan to influence policymaking and the modern corporate era had begun.

The 20th century saw a proliferation of enabling law across the world, which helped to drive

economic booms in many countries before and after World War I. Starting in the 1980s, manycountries with large state-owned corporations moved towardprivatization, the selling of publiclyowned services and enterprises to corporations. Deregulation (reducing the regulation of

corporate activity) often accompanied privatization as part of a laissez-faire policy. Another

major postwar shift was toward the development ofconglomerates, in which large corporations

purchased smaller corporations to expand their industrial base. Japanese firms developed ahorizontal conglomeration model, thekeiretsu, which was later duplicated in other countries as

well.

[edit] Corporate law

Main article: Corporate law

The existence of a corporation requires a special legal framework and body of law that

specifically grants the corporation legal personality, and typically views a corporation as afictional person, a legal person, or a moral person (as opposed to a natural person). Corporate

statutes typically empower corporations to own property, sign binding contracts, and pay taxes in

a capacity separate from that of its shareholders (who are sometimes referred to as "members".According to Lord ChancellorHaldane,

...a corporation is an abstraction. It has no mind of its own any more than it has a

body of its own; its active and directing will must consequently be sought in the

person of somebody who is really the directing mind and will of the corporation, the

very ego and centre of the personality of the corporation.

[20]

The legal personality has two economic implications. First it grants creditors priority over the

corporate assets upon liquidation. Second, corporate assets cannot be withdrawn by itsshareholders, nor can the assets of the firm be taken by personal creditors of its shareholders. The
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second feature requires special legislation and a special legal framework, as it cannot be

reproduced via standard contract law.[21]

The regulations most favorable to incorporation include:

Regulati

onDescription

Limited

liability

Unlike a partnership or sole proprietorship, shareholders of a modern

business corporation have "limited" liability for the corporation's debts

and obligations.[22] As a result, their losses cannot exceed the amount

which they contributed to the corporation as dues or payment for shares.

This enables corporations to "socialize their costs" for the primary benefit

of shareholders; to socialize a cost is to spread it to society in general.[23]

The economic rationale for this is that it allows anonymous trading in theshares of the corporation, by eliminating the corporation's creditors as a

stakeholder in such a transaction. Without limited liability, a creditor

would probably not allow any share to be sold to a buyer at least as

creditworthy as the seller. Limited liability further allows corporations to

raise large amounts of finance for their enterprises by combining funds

from many owners of stock. Limited liability reduces the amount that a

shareholder can lose in a company. This increases the attraction to

potential shareholders, and thus increases both the number of willing

shareholders and the amount they are likely to invest. However, some

jurisdictions also permit another type of corporation, in whichshareholders' liability is unlimited, for example the unlimited liability

corporation in two provinces of Canada, and the unlimited company in the

United Kingdom.

Perpetual

lifetime

Another advantage is that the assets and structure of the corporation

may continue beyond the lifetimes of its shareholders and bondholders.

This allows stability and the accumulation of capital, which is thus

available for investment in larger and longer-lasting projects than if the

corporate assets were subject to dissolution and distribution. This was

also important in medieval times, when land donated to the Church (acorporation) would not generate the feudal fees that a lord could claim

upon a landholder's death. In this regard, see Statute of Mortmain.

(However a corporation can be dissolved by a government authority,

putting an end to its existence as a legal entity. But this usually only

happens if the company breaks the law, eg fails to meet annual filing

requirements, or in certain circumstances if the company requests
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dissolution.)

[edit] Ownership and control

Persons and other legal entities composed of persons (such astrusts and other corporations) can

have the right to vote or receive dividends once declared by the Board. In the case of for-profit

corporations, these voters hold sharesof stock and are thus called shareholders or stockholders.

When no stockholders exist, a corporation may exist as a non-stock corporation (in the UnitedKingdom, a "company limited by guarantee") and instead of having stockholders, the corporation

has members who have the right to vote on its operations. Voting members are not the only

members of a "Corporation". The members of a non-stock corporation are identified in theArticles of Incorporation (UK equivalent:Articles of Association) and the titles of the member

classes may include "Trustee," "Active," "Associate," and/or "Honorary." However, each of

these listed in the Articles of Incorporation are members of the Corporation. The Articles of

Incorporation may define the "Corporation" by another name, such as "The ABC Club, Inc." and,in which case, the "Corporation" and "The ABC Club, Inc." or just "The Club" are considered

synonymous and interchangeable as they may appear elsewhere in the Articles of Incorporation

or the By-Laws. If the non-stock corporation is not operated for profit, it is called a not-for-profitcorporation. In either category, the corporation comprises a collective of individuals with a

distinct legal status and with special privileges not provided to ordinary unincorporated

businesses, to voluntary associations, or to groups of individuals.

There are two broad classes of corporate governance forms in the world. In most of the world,

control of the corporation is determined by aboard of directors which is elected by the

shareholders. In some jurisdictions, such as Germany, the control of the corporation is divided

into two tiers with a supervisory boardwhich elects a managing board. Germany is also uniquein having a system known as co-determinationin which half of the supervisory board consists of

representatives of the employees. TheCEO, president, treasurer, and other titled officers are

usually chosen by the board to manage the affairs of the corporation.

In addition to the limited influence of shareholders, corporations can be controlled (in part) bycreditors such as banks. In return for lending money to the corporation, creditors can demand a

controlling interest analogous to that of a member, including one or more seats on the board of

directors. In some jurisdictions, such as Germany and Japan, it is standard for banks to ownshares in corporations whereas in other jurisdictions such as the United States, under the Glass-

Steagall Act of 1933, and the United Kingdom, under the Bank of England, banks are prohibited

from owning shares in external corporations. However, since 1999 in the U. S., commercialbanks have been allowed to enter into investment banking through separate subsidiaries thanks to

the Financial Services Modernization Act orGramm-Leach-Bliley Act. Since 1997, banks in the

U. K. are supervised by the Financial Services Authority; its rules are non-restrictive allowingboth foreign and domestic capital to operate all financial institutions, including insurance,

commercial and financial banking.[24]
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Upon the Board's decision to dissolve a for-profit corporation, shareholders receive the leftovers,

following creditors and others with interests in the corporation. However shareholders receive

the benefit of limited liability, so they are liable only for the amount they contributed.

[edit] Formation

Historically, corporations were created by a chartergranted by government. Today, corporationsare usually registered with the state, province, or national government and regulated by the laws

enacted by that government. Registration is the main prerequisite to the corporation's assumption

of limited liability. The law sometimes requires the corporation to designate its principal address,as well as a registered agent(a person or company designated to receive legal service of

process). It may also be required to designate anagent or other legal representative of the

corporation.

Generally, a corporation filesarticles of incorporation with the government, laying out thegeneral nature of the corporation, the amount of stock it is authorized to issue, and the names and

addresses of directors. Once the articles are approved, the corporation's directors meet to createbylaws that govern the internal functions of the corporation, such as meeting procedures andofficer positions.

The law of the jurisdiction in which a corporation operates will regulate most of its internal

activities, as well as its finances. If a corporation operates outside its home state, it is often

required to register with other governments as aforeign corporation, and is almost alwayssubject to laws of its host state pertaining toemployment,crimes,contracts, civil actions, and the

like.

[edit] Naming

Corporations generally have a distinct name. Historically, some corporations were named after

their membership: for instance, "The President and Fellows of Harvard College." Nowadays,

corporations in most jurisdictions have a distinct name that does not need to make reference totheir membership. In Canada, this possibility is taken to its logical extreme: many smaller

Canadian corporations have no names at all, merely numbers based on theirProvincial Sales Tax

registration number (e.g., "12345678 Ontario Limited").

In most countries, corporate names include the term "Corporation", or an abbreviation thatdenotes the corporate status of the entity (e.g. "Incorporated" or "Inc." in the United States), or

the limited liability of its members (e.g. "Limited" or "Ltd."). These terms vary by jurisdiction

and language. In some jurisdictions they are mandatory, and in others they are not.[25]

Their useputs everybody on constructive notice that they are dealing with an entity whose liabilityis

limited, and does not reach back to the persons who own the entity: one can only collect from

whatever assets the entity still controls when one obtains a judgment against it.

Certain jurisdictions do not allow the use of the word "company" alone to denote corporatestatus, since the word "company" may refer to apartnership or to a sole proprietorship (in United
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States usage, but not generally in British usage), or even, archaically, to a group of not

necessarily related people (for example, those staying in a tavern).

[edit] Financial disclosure

In many jurisdictions, corporations whose shareholders benefit from limited liability are requiredto publish annual financial statementsand other data, so that creditors who do business with thecorporation are able to assess the creditworthiness of the corporation and cannot enforce claims

against shareholders.[26]. Shareholders therefore sacrifice some loss of privacy in return for

limited liability. This requirement generally applies in Europe, but not in the United States,except for publicly traded corporations, where financial disclosure is required for investor

protection.

[edit] Unresolved issues

The nature of the corporation continues to evolve in response to new situations as existing

corporations promote new ideas and structures, the courts respond, and governments issue newregulations. A question of long standing is that of diffused responsibility. For example, if acorporation is found liable for a death, how should culpability and punishment for it be allocated

among shareholders, directors, management and staff, and the corporation itself? See corporate

liability, and specifically, corporate manslaughter.

The law differs among jurisdictions, and is in a state of flux. Some argue that shareholdersshould be ultimately responsible in such circumstances, forcing them to consider issues other

than profit when investing, but a corporation may have millions of small shareholders who know

nothing about its business activities. Moreover, traders especiallyhedge funds may turnover shares in corporations many times a day.[27] The issue of corporate repeat offenders (see H.

Glasbeak, "Wealth by Stealth: Corporate Crime, Corporate Law, and the Perversion ofDemocracy" (Between the Lines Press: Toronto 2002) raises the question of the so-called "death

penalty for corporations."[28]

[edit] Types

For a list of types of corporation and other business types by country, see

Types of business entity.

Most corporations are registered with the local jurisdiction as either a stock corporation or a non-

stock corporation. Stock corporations sell stock to generate capital. A stock corporation isgenerally a for-profit corporation. Anon-stock corporationdoes not have stockholders, but may

have members who have voting rights in the corporation.

Some jurisdictions (Washington, D.C., for example) separate corporations into for-profit and

non-profit, as opposed to dividing into stock and non-stock.
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Several states also allow a variation of the corporation for use by professionals (i.e., those

individuals typically considered as professionals who require a license from the state to conduct

business). In some states, such asGeorgia, these corporations are known as "professionalcorporations".

[edit] For-profit and non-profit

Main article: non-profit organization

In modern economic systems, conventions ofcorporate governance commonly appear in a wide

variety of business and non-profit activities. Though the laws governing these creatures ofstatuteoften differ, the courts often interpret provisions of the law that apply to profit-making

enterprises in the same manner (or in a similar manner) when applying principles to non-profit

organizations as the underlying structures of these two types of entity often resemble eachother.

[edit] Closely held corporations and publicly traded corporations

The institution most often referenced by the word "corporation" is a publicly-traded orpublicly

traded corporation, the shares of which are traded on a public stock exchange (e.g., theNew

York Stock ExchangeorNasdaqin the United States) where shares of stock of corporations are

bought and sold by and to the general public. Most of the largest businesses in the world are

publicly traded corporations. However, the majority of corporations are said to be closely held,

privately held orclose corporations, meaning that no ready market exists for the trading of

shares. Many such corporations are owned and managed by a small group of businesspeople orcompanies, although the size of such a corporation can be as vast as the largest publiccorporations.

Closely held corporationsdo have some advantages over publicly traded corporations. A small,

closely held company can often make company-changing decisions much more rapidly than a

publicly traded company. A publicly traded company is also at the mercy of the market, havingcapital flow in and out based not only on what the company is doing but the market and even

what the competitors are doing. Publicly traded companies also have advantages over their

closely held counterparts. Publicly traded companies often have more working capitaland candelegate debt throughout all shareholders. This means that people invested in a publicly traded

company will each take a much smaller hit to their own capital as opposed to those involved witha closely held corporation. Publicly traded companies though suffer from this exact advantage. Aclosely held corporation can often voluntarily take a hit to profit with little to no repercussions

(as long as it is not a sustained loss). A publicly traded company though often comes under

extreme scrutiny if profit and growth are not evident to stock holders, thus stock holders may

sell, further damaging the company. Often this blow is enough to make a small public companyfail.
http://www.sos.state.ga.us/corporationshttp://www.sos.state.ga.us/corporationshttp://www.sos.state.ga.us/corporationshttp://en.wikipedia.org/w/index.php?title=Corporation&action=edit&section=11http://en.wikipedia.org/wiki/Non-profit_organizationhttp://en.wikipedia.org/wiki/Corporate_governancehttp://en.wikipedia.org/wiki/Non-profit_organizationhttp://en.wikipedia.org/wiki/Statutehttp://en.wikipedia.org/w/index.php?title=Corporation&action=edit&section=12http://en.wikipedia.org/wiki/New_York_Stock_Exchangehttp://en.wikipedia.org/wiki/New_York_Stock_Exchangehttp://en.wikipedia.org/wiki/New_York_Stock_Exchangehttp://en.wikipedia.org/wiki/Nasdaqhttp://en.wikipedia.org/wiki/Nasdaqhttp://en.wikipedia.org/wiki/Closely_held_corporationhttp://en.wikipedia.org/wiki/Closely_held_corporationhttp://en.wikipedia.org/wiki/Working_capitalhttp://en.wikipedia.org/wiki/Working_capitalhttp://www.sos.state.ga.us/corporationshttp://en.wikipedia.org/w/index.php?title=Corporation&action=edit&section=11http://en.wikipedia.org/wiki/Non-profit_organizationhttp://en.wikipedia.org/wiki/Corporate_governancehttp://en.wikipedia.org/wiki/Non-profit_organizationhttp://en.wikipedia.org/wiki/Statutehttp://en.wikipedia.org/w/index.php?title=Corporation&action=edit&section=12http://en.wikipedia.org/wiki/New_York_Stock_Exchangehttp://en.wikipedia.org/wiki/New_York_Stock_Exchangehttp://en.wikipedia.org/wiki/Nasdaqhttp://en.wikipedia.org/wiki/Closely_held_corporationhttp://en.wikipedia.org/wiki/Working_capital


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Often communities benefit from a closely held company more so than from a public company. A

closely held company is far more likely to stay in a single place that has treated them well, even

if going through hard times. The shareholders can incur some of the damage the company mayreceive from a bad year or slow period in the company profits. Closely held companies often

have a better relationship with workers. In larger, publicly traded companies, often when a year

has gone badly the first area to feel the effects are the work force with lay offs or worker hours,wages or benefits being cut. Again, in a closely held business the shareholders can incur this

profit damage rather than passing it to the workers. Closely held businesses are also often known

to be more socially responsiblethan publicly traded companies.[citation needed]

The affairs of publicly traded and closely held corporations are similar in many respects. Themain difference in most countries is that publicly traded corporations have the burden of

complying with additional securities laws, which (especially in the U.S.) may require additional

periodic disclosure (with more stringent requirements), stricter corporate governance standards,and additional procedural obligations in connection with major corporate transactions (e.g.

mergers) or events (e.g. elections of directors).

A closely held corporation may be a subsidiaryof another corporation (itsparent company),

which may itself be either a closely held or a public corporation.

[edit] Mutual benefit corporations

A mutual benefit nonprofit corporation is a corporation formed in the United States solely for thebenefit of its members. An example of a mutual benefit nonprofit corporation is a golf club.

Individuals pay to join the club, memberships may be bought and sold, and any property owned

by the club is distributed to its members if the club dissolves. The club can decide, in itscorporate bylaws, how many members to have, and who can be a member. Generally, while it is

a nonprofit corporation, a mutual benefit corporation is not a charity. Because it is not a charity,a mutual benefit nonprofit corporation cannot obtain 501(c)(3) status. If there is a dispute as to

how a mutual benefit nonprofit corporation is being operated, it is up to the members to resolvethe dispute since the corporation exists to solely serve the needs of its membership and not the

general public.[29]

[edit] Corporations globally

Main article: Multinational corporation

Following on the success of the corporate model at a national level, many corporations have

become transnational ormultinational corporations: growing beyond national boundaries toattain sometimes remarkable positions of power and influence in the process ofglobalizing.

The typical "transnational" or "multinational" may fit into a web of overlapping shareholders and

directorships, with multiple branches and lines in different regions, many such sub-groupings

comprising corporations in their own right. Growth by expansion may favor national or regionalbranches; growth by acquisition ormergercan result in a plethora of groupings scattered around
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and/or spanning the globe, with structures and names which do not always make clear the

structures of shareholder ownership and interaction.

In the spread of corporations across multiple continents, the importance ofcorporate culture hasgrown as a unifying factor and a counterweight to local national sensibilities and cultural

awareness.

[edit] Australia

Main article: Corporations Act 2001

In Australia corporations are registered and regulated by the Commonwealth Governmentthrough the Australian Securities and Investments Commission. Corporations law has been

largely codified in the Corporations Act 2001.

[edit] Brazil

In Brazilthere are many different types of corporations ("sociedades"), but the two most

common ones commercially speaking are: (i) "sociedade limitada", identified by "Ltda." after the

company's name, equivalent to the British limited company, and (ii) "sociedade annima" or"companhia", identified by "SA" or "Companhia" in the company's name, equivalent to the

British public limited company. The "Ltda." is mainly governed by the new Civil Code, enacted

in 2002, and the "SA" by the Law 6.404 dated 15 December 1976.

[edit] Canada

Main article: Canadian corporation

In Canada both the federal government and theprovinceshave corporate statutes, and thus a

corporation may have a provincial or a federal charter. Many older corporations in Canada stem

from Acts of Parliament passed before the introduction of general corporation law. The oldestcorporation in Canada is the Hudson's Bay Company; though its business has always been based

in Canada, its Royal Charterwas issued in England by King Charles II in 1670, and became a

Canadian charter by amendment in 1970 when it moved its corporate headquarters from Londonto Canada. Federally recognized corporations are regulated by the Canada Business Corporations

Act.

[edit] German-speaking countries

Main article:Aktiengesellschaft

Germany, Austria, Switzerlandand Liechtensteinrecognize two forms of corporation: the

Aktiengesellschaft(AG), analogous to public corporations in the English-speaking world, andthe Gesellschaft mit beschrnkter Haftung (GmbH), similar to (and an inspiration for) the

modern limited liability company.
http://en.wikipedia.org/wiki/Organizational_culturehttp://en.wikipedia.org/w/index.php?title=Corporation&action=edit&section=15http://en.wikipedia.org/wiki/Corporations_Act_2001http://en.wikipedia.org/wiki/Australiahttp://en.wikipedia.org/wiki/Australian_Securities_and_Investments_Commissionhttp://en.wikipedia.org/wiki/Australian_Securities_and_Investments_Commissionhttp://en.wikipedia.org/wiki/Corporations_Act_2001http://en.wikipedia.org/w/index.php?title=Corporation&action=edit&section=16http://en.wikipedia.org/wiki/Brazilhttp://en.wikipedia.org/wiki/Brazilhttp://en.wikipedia.org/w/index.php?title=Corporation&action=edit&section=17http://en.wikipedia.org/wiki/Canadian_corporationhttp://en.wikipedia.org/wiki/Canadahttp://en.wikipedia.org/wiki/Provincehttp://en.wikipedia.org/wiki/Provincehttp://en.wikipedia.org/wiki/Provincehttp://en.wikipedia.org/wiki/Act_of_Parliamenthttp://en.wikipedia.org/wiki/Hudson's_Bay_Companyhttp://en.wikipedia.org/wiki/Royal_Charterhttp://en.wikipedia.org/wiki/Royal_Charterhttp://en.wikipedia.org/wiki/Charles_II_of_Englandhttp://en.wikipedia.org/wiki/Canada_Business_Corporations_Acthttp://en.wikipedia.org/wiki/Canada_Business_Corporations_Acthttp://en.wikipedia.org/w/index.php?title=Corporation&action=edit&section=18http://en.wikipedia.org/wiki/Aktiengesellschafthttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/Austriahttp://en.wikipedia.org/wiki/Switzerlandhttp://en.wikipedia.org/wiki/Switzerlandhttp://en.wikipedia.org/wiki/Liechtensteinhttp://en.wikipedia.org/wiki/Liechtensteinhttp://en.wikipedia.org/wiki/Aktiengesellschafthttp://en.wikipedia.org/wiki/Aktiengesellschafthttp://en.wikipedia.org/wiki/Gesellschaft_mit_beschr%C3%A4nkter_Haftunghttp://en.wikipedia.org/wiki/Limited_liability_companyhttp://en.wikipedia.org/wiki/Organizational_culturehttp://en.wikipedia.org/w/index.php?title=Corporation&action=edit&section=15http://en.wikipedia.org/wiki/Corporations_Act_2001http://en.wikipedia.org/wiki/Australiahttp://en.wikipedia.org/wiki/Australian_Securities_and_Investments_Commissionhttp://en.wikipedia.org/wiki/Corporations_Act_2001http://en.wikipedia.org/w/index.php?title=Corporation&action=edit&section=16http://en.wikipedia.org/wiki/Brazilhttp://en.wikipedia.org/w/index.php?title=Corporation&action=edit&section=17http://en.wikipedia.org/wiki/Canadian_corporationhttp://en.wikipedia.org/wiki/Canadahttp://en.wikipedia.org/wiki/Provincehttp://en.wikipedia.org/wiki/Act_of_Parliamenthttp://en.wikipedia.org/wiki/Hudson's_Bay_Companyhttp://en.wikipedia.org/wiki/Royal_Charterhttp://en.wikipedia.org/wiki/Charles_II_of_Englandhttp://en.wikipedia.org/wiki/Canada_Business_Corporations_Acthttp://en.wikipedia.org/wiki/Canada_Business_Corporations_Acthttp://en.wikipedia.org/w/index.php?title=Corporation&action=edit&section=18http://en.wikipedia.org/wiki/Aktiengesellschafthttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/Austriahttp://en.wikipedia.org/wiki/Switzerlandhttp://en.wikipedia.org/wiki/Liechtensteinhttp://en.wikipedia.org/wiki/Aktiengesellschafthttp://en.wikipedia.org/wiki/Gesellschaft_mit_beschr%C3%A4nkter_Haftunghttp://en.wikipedia.org/wiki/Limited_liability_company


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[edit] Italy

The Italian Republic recognizes three types of company with limited liability: "S.r.l", or "Societ

a responsabilit limitata" (a private limited company), "S.p.A" or "Societ per Azioni" (a joint-

stock company, similar to a Public Limited Company in the United Kingdom), and "S.a.p.a"

("Societ in Accomandita per Azioni"). The latter is a hybrid form that involves two categoriesof shareholders, some with and some without limited liability, and is rarely used in practice.

[edit] Japan

In Japan, both the state and local public entities under theLocal Autonomy Law (prefectures and

municipalities) are considered to be corporations (hjin?). Non-profit corporations may beestablished under the Civil Code.

The term "company" (kaisha?) is used to refer to business corporations. The predominantform is the kabushiki kaisha(), used by public corporations as well as smaller

enterprises. Mochibun kaisha (), a form for smaller enterprises, are becomingincreasingly common. Between 2002 and 2008, theintermediary corporation(chkanhjin?) existed to bridge the gap between for-profit companies and non-governmental and non-

profit organizations.

[edit] United Kingdom

Main article: UK company law

In the United Kingdom, 'corporation' most commonly refers to abody corporateformed by

Royal Charteror by statute, of which few now remain. The BBC is the oldest and best known

corporation within the UK that is still in existence. Others, such as theBritish Steel Corporation,wereprivatizedin the 1980s.

In the private sector, corporations are referred to in law as companies, and are regulated by the

Companies Act 2006(or theNorthern Irelandequivalent). The most common type of company is

the private limited company ("Limited" or "Ltd."). Private limited companies can either be

limited by shares or by guarantee. Other corporate forms include thepublic limited company("PLC") and the unlimited company.

In the United Kingdom, 'corporation' can also refer to acorporation sole, which is an office held

by an individual natural person, and has a legal entity separate from that person.

[edit] United States

See also: Delaware corporation

In the context of debt collection, the United States is itself legally defined as a "Federal

corporation".[30] Furthermore, several types of conventional corporations exist in the United

States. Generically, any business entity that is recognized as distinct from the people who own it
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(i.e., is not a sole proprietorship or a partnership) is a corporation. This generic label includes

entities that are known by such legal labels as association, organization and limited liability

company, as well as corporations proper. Only a company that has been formally incorporatedaccording to the laws of a particular state is called corporation. American corporations can be

either profit-making companies or non-profit entities. Tax-exempt non-profit corporations are

often called 501(c)3 corporation, after the section of the Internal Revenue Code that addressestheir tax exemption.

Corporations are created by filing the requisite documents with a particular state government.

The process is called incorporation, referring to the abstract concept of clothing the entity with

a "veil" of artificial personhood (embodying, or corporating it, corpus being the Latin wordfor body). Only certain corporations, including banks, are chartered. Others simply file their

articles of incorporation with the state government as part of a registration process.

The federal governmentcan only create corporate entities pursuant to relevant powers in the U.S.

Constitution. For example, Congress has constitutional power to regulate banking, so it has

power to charterfederal banks.

Once incorporated, the corporation has artificial personhood everywhere it may operate, until

such time as the corporation may be dissolved. A corporation that operates in one state while

being incorporated in another is a foreign corporation. This label also applies to corporationsincorporated outside of the United States. Foreign corporations must usually register with the

secretary of states office in each state to lawfully conduct business in that state.

A corporation is legally a citizen of the state (or other jurisdiction) in which it is incorporated

(except when circumstances direct the corporation be classified as a citizen of the state in whichit has its head office, or the state in which it does the majority of its business). Corporate

business law differs from state to state, and many prospective corporations choose to incorporatein a state whose laws are most favorable to its business interests. Many large corporations areincorporated in Delaware, for example, without being physically located there because that state

has very favorable corporate tax and disclosure laws.

Companies set up forprivacyor asset protection often incorporate inNevada, which does not

require disclosure of share ownership. Many states, particularly smaller ones, have modeled theircorporate statutes after the Model Business Corporation Act, one of many model sets of law

prepared and published by theAmerican Bar Association.

Asjuristic persons, corporations have certain rights that attach to natural purposes. The vast

majority of them attach to corporations under state law, especially the law of the state in whichthe company is incorporated since the corporations very existence is predicated on the laws of

that state. A few rights also attach by federal constitutional and statutory law, but they are few

and far between compared to the rights of natural persons. For example, a corporation has thepersonal right to bring a lawsuit (as well as the capacity to be sued) and, like a natural person, a

corporation can be libeled.
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But a corporation has no constitutional right to freely exercise its religion because religious

exercise is something that only "natural" persons can do. That is, only human beings, not

business entities, have the necessary faculties of belief and spirituality that enable them topossess and exercise religious beliefs.

Harvard College (a component ofHarvard University), formally the President and Fellows ofHarvard College (also known as the Harvard Corporation), is the oldest corporation in the

western hemisphere. Founded in 1636, the second of Harvards two governing boards wasincorporated by the Great and General Court of Massachusetts in 1650. Significantly,

Massachusetts itself was a corporate colony at that time owned and operated by the

Massachusetts Bay Company (until it lost its charter in 1684) - so Harvard College is acorporation created by a corporation.

Many nations have modeled their own corporate laws on American business law. Corporate law

in Saudi Arabia, for example, follows the model of New York State corporate law. In addition to

typical corporations in the United States, the federal government, in 1971 passed the Alaska

Native Claims Settlement Act (ANCSA), which authorized the creation of 12 regional nativecorporations forAlaska Natives and over 200 village corporations that were entitled to a

settlement of land and cash. In addition to the 12 regional corporations, the legislation permitteda thirteenth regional corporation without a land settlement for those Alaska Natives living out of

the State of Alaska at the time of passage of ANCSA.

[edit] Corporate taxation

Main article: Corporate tax

In many countries corporate profits are taxed at a corporate tax rate, and dividends paid to

shareholders are taxed at a separate rate. Such a system is sometimes referred to as "doubletaxation", because any profits distributed to shareholders will eventually be taxed twice. Onesolution to this (as in the case of the Australian and UK tax systems) is for the recipient of the

dividend to be entitled to a tax credit which addresses the fact that the profits represented by the

dividend have already been taxed. The company profit being passed on is therefore effectivelyonly taxed at the rate of tax paid by the eventual recipient of the dividend. In other systems,

dividends are taxed at a lower rate than other income (e.g. in the US) or shareholders are taxed

directly on the corporation's profits and dividends are not taxed (e.g. S corporations in the US).

[edit] Criticisms

Main article: Criticisms of Corporations

AsAdam Smith pointed out in the Wealth of Nations, when ownership is separated from

management (i.e. the actual production process required to obtain the capital), the latter willinevitably begin to neglect the interests of the former, creating dysfunction within the company.[31] Some maintain that recent events in corporate America may serve to reinforce Smith's

warnings about the dangers of legally-protected collectivist hierarchies.[32]
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Data From Legal Dictionary

corporation n. an organization formed with state governmental approval to act as an artificial person tocarry on business (or other activities), which can sue or be sued, and (unless it is non-profit) can issueshares of stock to raise funds with which to start a business or increase its capital. One benefit is that acorporation's liability for damages or debts is limited to its assets, so the shareholders and officers are

protected from personal claims, unless they commit fraud. For private business corporations the Articlesof Incorporation filed with the Secretary of State of the incorporating state must include certaininformation, including the name of the responsible party or parties (incorporators and agent foracceptance of service), the amount of stock it will be authorized to issue, and its purpose. In some statesthe purpose may be a general statement of any purpose allowed by law, while others require greaterspecificity. Corporation shareholders elect a board of directors, which in turn adopts bylaws, chooses theofficers and hires top management (which in smaller corporations are often the directors and/orshareholders). Annual meetings are required of both the shareholders and the Board, and major policydecisions must be made by resolution of the Board (which often delegates much authority to officers andcommittees). Issuance of stock of less than $300,000, with no public solicitation and relatively fewshareholders, is either automatically approved by the state commissioner of corporations or requires apetition outlining the financing. Some states are considered lax in supervision, have low filing fees andcorporate taxes and are popular incorporation states, but corporations must register with Secretary of

States of other states where they do substantial business as a "foreign" corporation. Larger stockofferings and/or those offered to the general public require approval by the Securities and ExchangeCommission after close scrutiny and approval of a public "prospectus" which details the entire operationof the corporation. There are also non-profit (or not for profit) corporations organized for religious,educational, charitable or public service purposes. Public corporations are those formed by a municipal,state or federal government for public purposes such as operating a dam and utility project. A closecorporation is made up of a handful of shareholders with a working or familial connection which ispermitted to operate informally without resolutions and regular Board meetings. A de jure corporation isone that is formally operated under the law, while a de facto corporation is one which operates as if itwere legal, but without the Articles of Incorporation being valid. Corporations can range from the CornerMini-Mart to General Electric. (See: articles of incorporation,bylaws,board of directors, close corporation,public corporation, de jure corporation,de facto corporation, shareholder,stock,securities)

Copyright 1981-2005 by Gerald N. Hill and Kathleen T. Hill. All Right reserved.

corporationnounaffiliate,affiliation,agglomerate,alliance,artificial entity,artificial person,associate,association,body,body corporate,business,business association, busiiess establishment, coalition,

combination,combine,commercial enterprise, company,concern,confederacy,consociation,

consolidation,corporate body, enterprise, establishment,federation,firm,foundation,holding company,

industry,institute,institution, joint connern, legal body, legal entity,operating company, sodality, stock

company, syndicate,union

Associated concepts:alter ego,business trust,cartel,closed corporation, closely held corporation,

consolidation, corpooate charter, corporate officers dissolution, corporate struccure, de facto corporation,

de jure corporation, derivative accion, directors,dissolution, domestic corporation, fictitious corporations,

foreign corporation, joint stock associations, limited partnerships,membership corporation,merger,

muuicipal corporation,officers, parent corporation, public corroration,partnership,proxies, self-dealing,sole proprietorship, voting trusts

Foreign phrases: Jus quo universitates utuntur est idem quod habent privati.The law which governs

corporations is the same as that which governs individuals. Corporatio non dicitur aliquid facere nisi id sit

collegialiter deliberrri, etiamsi major pars id faciat. A corporation is not said to do anything unless it be

deliberated upon collectively, allhough the majority should do it.

See also:affiliation,alliance,association,business,company,concern, enterprise, league, trust

Burton's Legal Thesaurus, 4E. Copyright 2007 by William C. Burton. Used with permission of The McGraw-Hill Companies, Inc.
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