Corporation as an Entity

Corporation as an Entity

Definition of a Corporation

• A corporation is a fictitious legal entity, recognized as an independent individual separate from its principals (owners).
• It serves as a legally created fiction under U.S. law.

Legal Recognition

• Corporations are entitled to full First Amendment protection for political speech, as established by the U.S. Supreme Court.
• In a business context, a corporation can:
  • File a lawsuit (sue).
  • Be sued (liable in court).
  • Enter into contracts or breach contracts.

Distinction from Other Business Structures

• Unlike sole proprietorships and partnerships:
  • The obligations of corporations are separate and distinct from the personal obligations of their principals.

Formation and Governance of Corporations

• State Law Filing: Corporations are created through filings under state law.
• State Statutes: Govern the formation and operation of corporations and can vary by state.
  • Each state has specific legislation (often a business corporation law) addressing:
  • Structure of the corporation.
  • Oversight of corporate managers.
  • Rights of principals regarding the sale of assets or ownership interests.
  • Annual reporting requirements and compliance.

Model Acts and Regulations

• Over half of U.S. states have adopted the Revised Model Business Corporation Act (RMBCA), providing a framework for corporate governance.
• Federal Laws: In addition to state laws, federal regulations govern:
  • The offering or trading of ownership interests (securities).
  • Set specific internal governance standards for certain companies.

Key Takeaways

• A corporation is a legally independent entity, distinct from its owners, providing liability protection and various business capabilities.
• Its formation is governed by state law, with the RMBCA being a common reference, supplemented by federal regulations where applicable.