The Essence of Business Corporation Models.Key Natures and Benefits of Business Corporation.

April 20, 2010 by oscadmin
Filed under: Business Management 



Business Corporation
A corporation is one of the few business entities that actually takes on a separate legal persona. Although a corporation is not a living being, like Joey, or Hewlett and Packard, it has legal rights like a person. A corporation is considered a “legal or fictional person” that has a perpetual lifetime. It can own property, sign contracts, pay taxes, and otherwise participate in society (but a corporation cannot vote for mayor or the president of the United States like a human citizen can). A corporation usually has a board of directors who supervise and advise the chief executive officer (the CEO, who is often a member of the board of directors). The board of directors has a fiduciary duty to protect the corporation’s interests and livelihood, as well as the interests of the shareholders (sometimes those are not the same). Corporations sell ownership shares to people, trusts, and other corporations. Unlike a proprietorship or partnership, owners of the corporation are not personally liable for actions of the corporation, and their personal losses are only as large as their investment in corporate stock (shares). But officers of a corporation are increasingly being held accountable for corporate misdeeds. The Sarbanes-Oxley Act of 2002 now requires corporate officers to sign off on the financial statements and guarantee that no one has been cooking the books.




Most corporations are publicly traded corporations whose shares are bought and sold on an exchange, like the New York Stock Exchange or NASDAQ. Some corporations are private or closely held, and the stock of these entities is rarely traded, and if so, only directly when a seller has a ready buyer (that is, not on an open and public stock exchange).




There are several benefits to a corporation: limited liability, perpetual lifetime, the idea that it is a separate entity or “fictional person,” and the ability to raise large amounts of capital (cash) from a wide variety of places. There are also some downsides to incorporation (the act of turning a business into a corporation): lots of paperwork (a corporation, especially one that is publicly traded, must produce reams of paper for government regulators, stockholders, and anyone else who is interested), double taxation (the corporation is taxed on its profits, and shareholders are taxed again on any dividends they earn), and market oversight (the company’s value will vary day to day depending on the price of the shares).

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3 Comments on The Essence of Business Corporation Models.Key Natures and Benefits of Business Corporation.

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