Chapter38 - The Nature of the Corporation The corporation...

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The Nature of the Corporation The corporation is a creature of statute. A corporation is an artificial being, existing in law only and neither tangible nor visible. Its existence depends generally on state law, although some corporations, especially public organizations, can be created under federal law. Each state has its own body of corporate law, and these laws are not entirely uniform. A corporation can consist of one or more natural persons (as opposed to the artificial legal person of the corporation) identified under a common name. The corporation substitutes itself for its shareholders in conducting corporate business and in incurring liability, yet its authority to act and the liability for its actions are separate and apart from the individuals who own it. (In certain limited situations, the "corporate veil" can be pierced; that is, liability for the corporation's obligations can be extended to shareholders.) Responsibility for the overall management of the corporation is entrusted to a board of directors, which is elected by the shareholders. The board of directors hires corporate officers and other employees to run the daily business operations of the corporation.
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Directors: Persons elected by shareholders and responsible for overall management of the corporation; Officers: Persons hired by the board of directors and responsible for operations of the corporation; and Shareholders: Owners of the corporation in proportion to their ownership of corporate stock outstanding. Corporate Profits Dividends: Corporate profits distributed to shareholders in proportion to their shares held; and Retained Earnings: Corporate profits not distributed to shareholders. Corporate Taxation: Corporate profits are taxable to the corporation when they are distributed in the form of dividends, but not when they are “reinvested” in the corporation as retained earnings.
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Rights of Corporations A corporation is recognized under state and federal law as a "person," and it enjoys many of the same rights and privileges that natural persons who are U.S. citizens enjoy. The Bill of Rights guarantees persons certain protections, and corporations are considered persons in most instances. A corporation has the same right of access to the courts and can sue or be sued. It also has the right of due process before denial of life, liberty, or property, as well as freedom from unreasonable searches and seizures and from double jeopardy. Constitutional Rights:
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Chapter38 - The Nature of the Corporation The corporation...

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