Limited Liability and Legal Entity
Limited liability distinguishes a corporation. Shareholders profit from dividends and stock appreciation but bear no personal debt liability. Corporations, including Microsoft and Coca-Cola, make up most large businesses. They can enter contracts, loan money, sue, be sued, hire, own assets, and pay taxes. Shareholders, not personally liable for debts, profit. Corporations are legal entities, separate from owners, created for profit or not-for-profit.
Corporate Identity and Purpose
What describes a corporation?
Created by a legal process called incorporation, a corporation operates for profit. It can sue, be sued, own assets, pay taxes, and borrow money. Shareholders pursue common goals. Most corporations aim for profit, returning earnings to shareholders. Nonprofits focus on social causes. Corporations, either for-profit like C Corporations or nonprofit, issue stock, elect a board, and operate independently from owners, who enjoy limited liability.
Advantages of Incorporation
Which characteristic of a corporation is an advantage?
Corporations offer limited personal liability, easy ownership transfer, business continuity, capital access, and tax benefits. Recognized as separate legal entities, they protect owner assets and facilitate business activities. Shares ease ownership shifts, offering more security and funding opportunities. Tax advantages vary by corporation type, enhancing flexibility for the owners’ benefits.
Key Characteristics
What are the 4 characteristics of a corporation?
- Separate legal existence
- Continuous life
- Ability to acquire capital
- Transferability of ownership
Additional characteristics include:
- Limited liability
- Government regulations
- Taxation
- Governance and management structure
These attributes enable corporations to operate efficiently within legal frameworks.