Corporate Law encompasses all the legal issues that corporations can face. Corporations are subject to numerous regulations they must follow in order to enjoy the tax and other benefits corporations receive. Most states require corporations to conduct annual meetings with their shareholders, and many require more frequent meetings of the board of directors and the corporation’s officers. Most corporations have an attorney present at all of these meetings to ensure that the corporation complies with all state and federal requirements.
What’s a corporation?
A corporation is a legal entity that exists to conduct business. It’s a separate legal entity from the people who make it. A corporation can conduct business in its own name, just like any person can. When a person owns a part of a corporation, their liability is limited to their ownership in the corporation. They can’t lose more than their investment in the corporation.
In addition to these unique Corporate Law issues, corporations also face all the legal issues that other businesses face. These issues can include employment law issues, contract disputes, product liability, intellectual property management, and others. Smaller corporations may be able to hire a single attorney with broad experience to handle all the corporation’s legal issues. Larger corporations, however, may need a team of lawyers with different specialties to handle daily contract, employment, and business issues.
Terms to Know
- Corporate Law Definition: A legal entity formed to conduct business; can be either a close corporation, where only a few people own the corporation and its stock is not publicly traded, or a public corporation, whose stock is traded on the stock exchange
- S Corporation: A special type of corporation with a limited number of shareholders that enjoys certain tax benefits but without the stock options of a typical corporation
- Piercing the Corporate Veil in the Corporate Law: A judicial act of imposing personal liability on the owners, shareholders, or officers of a corporation for the corporation’s wrongful acts
- Chief Executive Officer agree the Corporate Law: The executive with the chief decision-making authority to manage daily operations in a corporation; appointed by the corporation’s board of directors
- Board of Directors: A group of individuals elected by the shareholders of a corporation to manage the corporation’s affairs and appoint officers.
The main characteristics of Corporate Law
Corporation owners pool their resources into a separate entity. That entity can use the assets and sell them. Creditors can’t easily take the assets back. Instead, they form their own entity that acts on its own.
When a corporation gets sued, it’s only the corporation’s assets that are on the line. The plaintiff can’t go after the personal assets of the corporation’s owners. A corporation’s limited liability allows owners to take risks and diversify their investments.
If an owner decides they no longer want a share in the corporation, the corporation doesn’t have to shut down. One of the unique features of a corporation is that owners can transfer shares without the same difficulties and hassles that come with transferring ownership of a partnership. There can be limits on how shareholders transfer ownership, but the fact that ownership can be transferred allows the corporation to go on when owners want to make changes.
Corporations have a defined structure for how they conduct their affairs. There’s a board of directors and officers. These groups share and split decision-making authority. Board members hire and monitor officers. They also ratify their major decisions. The shareholders elect the board.
Officers handle the day-to-day operation of the company. They’re the leaders for conducting transactions and making the business run each day. With a defined leadership structure, parties that do business with the corporation have the assurances that actions of officers and the board of directors are legally binding on the corporation.
Owners have a say in making decisions for the corporation, but they don’t directly run the company. Investors also have the right to the corporation’s profits. Usually, an owner has decision-making authority and profit sharing in proportion to their ownership interest. Owners typically vote to elect board members.