Corporate law

One of the most common ways to operate a business today is through a corporation. It is difficult to contemplate the functioning of our economy without the corporation or a reliable system of corporate law. Operating a business without a corporation, most commonly through a sole proprietorship or a partnership, involves personal responsibility for all the debts, liabilities and obligations of the business. Comparatively, a corporation provides the distinguishing feature of limited liability for its owners and managers because it is considered a separate legal person. The main components of the corporation include shareholders who own the corporation, directors and officers who manage and supervise the corporation, and in many cases, non-executive employees who work for the corporation. Since corporations are not human persons but have rights and obligations that are similar, shareholders elect directors who are authorized to act on the corporation’s behalf. Why Incorporate? The advantages of incorporating a business are tied in to the corporation’s separate legal personality and limited liability. Some of the advantages include: Limiting the liability of shareholders for the debts, obligations and liabilities of the corporation to the amount of their initial investment to purchase shares in the corporation. In contrast, a sole proprietor or a partner could potentially lose personal assets beyond those invested in the business. It is possible to separate the owners, directors and employees of the business within a corporation, whereas a sole proprietor is the owner and manager of the business, and cannot be his or her own employee. A corporation allows the business to attract and motivate employees and management by allowing for partial ownership of the corporation. Rates of taxation within the corporation are generally lower than personal rates. It is possible for a corporation to merge or amalgamate with another corporation. Corporations also have perpetual existence which means that shareholders, officers and directors can come and go without affecting the distinct legal personality of the corporation.