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.
3. T
here are many different types of
corporation. In contrast with other
forms of business entity, such as a
joint proprietorship or sole propri-
etorship, one of the main advantages of a
corporation is limited liability.
Limited liability protects passive sharehold-
ers in law, meaning they will not be held li-
able 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 con-
tentious, because third parties do not ac-
tually agree to waive their right to pursue
shareholders.
Stock corporations recognize investments
by issuing stock or shares. Non-stock cor-
porations are precluded from issuing stock,
and are instead owned by persons or other
legal entities that have obtained member-
ship of the corporation.
Registered corporations have legal person-
ality, limiting shareholders’ liability to the
amount of their investment in most cir-
cumstances.
A corporation is a type of organization
authorized by the state to act as a sin-
gle 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 jurisdic-
tions today, new corporations are created
through registration.