Corporate Structure and Stockholder Rights: Key Concepts in Business Law

What is a corporation?

An entity created by law, separate from its owners, with the same rights and privileges as a person.

Name three advantages of corporations.

Separate legal entity, limited liability, transferable ownership rights.

Name two disadvantages of corporations.

Governmental regulation, corporate taxation.

What are the rights of stockholders?

Vote at stockholder meetings, sell or dispose of stock, purchase proportional additional shares, receive dividends, share in assets after liquidation.

What is a share of stock?

A unit of ownership in a corporation.

What is a stock certificate?

A document that proves ownership of shares of stock.

What is the difference between privately held and publicly held corporations?

Privately held corporations have a small number of owners and do not trade stock publicly; publicly held corporations trade stock on public exchanges.

What does 'limited liability' mean?

Stockholders are only responsible for the amount they invested in the corporation.

What is meant by 'continuous life' of a corporation?

The corporation continues to exist regardless of changes in ownership or management.

What is 'no mutual agency for stockholders'?

Individual stockholders cannot bind the corporation to contracts; only authorized corporate officers can.