Corporation Business & Legal Forms
An organization formed with state governmental approval to act as an artificial
person to carry on business (or other activities), which can sue or be sued, and
(unless it is non-profit) can issue shares of stock to raise funds with which to
start a business or increase its capital. One benefit is that a corporation'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 articles of incorporation filed with the Secretary of
State of the incorporating state must include certain information, including the
name of the responsible party or parties (incorporators and agent for acceptance
of service), the amount of stock it will be authorized to issue, and its purpose.
In some states the purpose may be a general statement of any purpose allowed By
law, while others require greater specificity. Corporation shareholders elect a
board of directors, which in turn adopts Bylaws, chooses the officers and hires
top management (which in smaller corporations are often the directors and/or shareholders).
Annual meetings are required of both the shareholders and the board, and major policy
decisions must be made By resolution of the board (which often delegates much authority
to officers and committees). Issuance of stock of less than $300,000, with no public
solicitation and relatively few shareholders, is either automatically approved By
the state commissioner of corporations or requires a petition outlining the financing.
Some states are considered lax in supervision, have low filing fees and corporate
taxes and are popular incorporation states, but corporations must register with
Secretaries of State of other states where they do substantial business as a "foreign"
corporation. Larger stock offerings and/or those offered to the general public require
approval By the Securities and Exchange Commission after close scrutiny and approval
of a public "prospectus" which details the entire operation of 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 close corporation is made up of a handful of shareholders
with a working or familial connection which is permitted to operate informally without
resolutions and regular board meetings. A de jure corporation is one that is formally
operated under the law, while a de facto corporation is one which operates as if
it were legal, but without the articles of incorporation being valid. Corporations
can range from the Corner Mini-Mart to General Electric.