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A corporation is an organization—usually a group of people or a company—authorized by the state to act as a single entity (a legal entity recognized by private and public law as "born out of statute"; a legal person in a legal context) and recognized as such in law for certain purposes.[1]: 10 Early incorporated entities were established by charter (i.e., by an ad hoc act granted by a monarch or passed by a parliament or legislature). Most jurisdictions now allow the creation of new corporations through registration. Corporations come in many different types but are usually divided by the law of the jurisdiction where they are chartered based on two aspects: whether they can issue stock, or whether they are formed to make a profit.[2] Depending on the number of owners, a corporation can be classified as aggregate (the subject of this article) or sole (a legal entity consisting of a single incorporated office occupied by a single natural person).
Registered corporations have legal personality recognized by local authorities and their shares are owned by shareholders[3][4] whose liability is generally limited to their investment. One of the attractive early advantages business corporations offered to their investors, compared to earlier business entities like sole proprietorships and joint partnerships, was limited liability. Limited liability means that a passive shareholder in a corporation will not be personally liable either for contractually agreed obligations of the corporation, or for torts (involuntary harms) committed by the corporation against a third party.
Where local law distinguishes corporations by their ability to issue stock, corporations allowed to do so are referred to as stock corporations; one type of investment in the corporation is through stock, and owners of stock are referred to as stockholders or shareholders. Corporations not allowed to issue stock are referred to as non-stock corporations; i.e. those who are considered the owners of a non-stock corporation are persons (or other entities) who have obtained membership in the corporation and are referred to as a member of the corporation. Corporations chartered in regions where they are distinguished by whether they are allowed to be for-profit are referred to as for-profit and not-for-profit corporations, respectively.
Shareholders do not typically actively manage a corporation; shareholders instead elect or appoint a board of directors to control the corporation in a fiduciary capacity. In most circumstances, a shareholder may also serve as a director or officer of a corporation. Countries with co-determination employ the practice of workers of an enterprise having the right to vote for representatives on the board of directors in a company.
- ^ Hirst, Scott (2018-07-01). "The Case for Investor Ordering". The Harvard Law School Program on Corporate Governance Discussion Paper. 2017–13. Archived from the original on 2021-01-17. Retrieved 2020-11-16.
- ^ "Types Of Corporations | Incorporate A Business". www.corpnet.com. Archived from the original on 2017-10-15. Retrieved 2017-06-10.
- ^ Pettet, B. G. (2005). Company Law. Pearson Education. p. 151.
Reading the above, makes it possible to forget that the shareholders are the owners of the company.
- ^ Courtney, Thomas B. (2002). The Law of Private Companies (2nd ed.). Bloomsbury Professional. 4.001.