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Business Law

Corporations

Corporations are people, my friend.

-Mitt Romney (former Presidential candidate)

Corporations have an outsized impact on law and the economy. Most U.S. businesses are not corporations. And among corporations, the vast majority are small or closely held; only a small fraction are large, publicly traded multinationals. That said, corporate law remains one of the most complex and financially consequential areas of business law.

Here are some of the critical aspects of a corporation not all are unique to the corporation but all are necessary.

  • Formation: Corporations exist only by complying with state statutes. They require filing articles of incorporation, appointing a registered agent, and paying fees. Unlike informal businesses, corporations must follow ongoing formalities (e.g., meetings, reports).

  • Entity status: A corporation is legally distinct from its owners and managers.  In some contexts corporations can be said to have 'personhood'.

  • Limited liability: The corporation, not its owners, is liable for debts and obligations. Shareholders and managers generally aren’t personally responsible.

  • Shareholders: Shareholders own the corporation through stock, but don’t manage it. Their power is proportional to their shares, and they can lose their investment but not be liable beyond it.

  • Management: A board of directors manages the corporation, separating ownership from control. This allows for passive investment.

  • Transferability: Shares can usually be sold or gifted freely, ensuring continuity of the corporation regardless of ownership changes.

  • Double Taxation: Corporations face “double taxation”—the corporation pays taxes on profits, and shareholders pay taxes again on dividends. 

  • Funding and economic role: Corporations raise money through loans or stock sales giving them their disproportionate economic impact.

It is beyond the scope of this guide to go into specific detail about all the issues specific to corporations.  However the following resources will provide a starting place.