What Is a Corporation?
Marko Vujosevic
WHAT IS A CORPORATION?
A corporation is a type of organization authorized by the state to act as a single legal entity recognized by private and public law. Early corporations were established by ‘charter’: an ad hoc act passed by a legislature or parliament, or granted by a monarch. In most jurisdictions today, new corporations are created through registration.
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here are many different types of corporation. In contrast with other forms of business entity, such as a joint proprietorship or sole proprietorship, one of the main advantages of a corporation is limited liability. Limited liability protects passive shareholders in law, meaning they will not be held liable for contractually agreed obligations of the corporation, and protecting them from being sued for torts – or involuntary harms – committed by the corporation against a third party.
However, the latter issue is somewhat contentious, because third parties do not actually agree to waive their right to pursue shareholders. Stock corporations recognize investments by issuing stock or shares. Non-stock corporations are precluded from issuing stock, and are instead owned by persons or other legal entities that have obtained membership of the corporation. Registered corporations have legal personality, limiting shareholders’ liability to the amount of their investment in most circumstances.
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