What Does Corporate Law Include: Everything You Need to Know
Knowing what does corporate law include is essential if you have a business.3 min read
Knowing what does corporate law include is essential if you have a business. Corporate law, also known as company law or corporations law, deals with corporations forming and operating. This is related to contract and commercial law. The corporate law makes up the rules, practices, regulations, and laws that control the creation and operation of any corporation. This body of law governs legal entities that conduct business.
What Is the Purpose of Corporate Law?
The laws cover the obligations and rights of everyone who is involved with the following in an operation:
- Forming the corporation
- Owning the corporation
- Operating the corporation
- Managing the corporation
Corporate law is meant to be friendly for business. It's not meant to make it harder to get things done. The laws are in place so it's simpler for corporations to conduct business. The rules that are in charge of forming a corporation and how to take certain actions are set in place to help companies and make everything equal for everyone involved. They ensure that corporations act in ways that are predictable so others can rely on them.
What Are the Characteristics of a Corporation?
Corporations are considered taxable entities, which protect shareholders and owners from personal liability for any debts or liabilities that the corporation incurs. There are some exceptions to this, such as taxes that aren't paid. Until a corporation is officially dissolved, it has a perpetual life. Deaths or terminations of stockholders or officials don't change the structure of the corporation. There are registration laws that states have where corporations are required to include other states to ask for permission to do business in the state.
Federal laws applicable to corporations are also in place. In particular industries, corporations are subjected to federal licensing and regulations, such as public transportation and communications. The Securities Act of 1933 is a federal law that controls how corporate securities, such as bonds and stocks, are given out and sold.
What Are Principles of Corporate Law?
Corporate law has five principles that are common to it. The first is legal personality, where owners of corporations put their resources into a different entity. The entity can then utilize their assets and sell them if they wish. Creditors can't take assets back easily but can form a separate entity that acts on its own accord.
Limited liability is when a corporation is sued but only the assets of the corporation are at risk. The plaintiff may not go after any individual assets from the owners of the corporation. The limited liability lets their owners take risks and expand their investments.
If an owner ends up deciding they don't want a part of the corporation, it doesn't mean the business needs to close. A unique part of a corporation is that the owners may transfer shares without having the same hassles and difficulties that are often related to ownership transferring in a partnership. There may be limits regarding how ownership is transferred among shareholders, but ownership can get transferred to let the business continue when owners wish to make changes.
Delegated management is another principle of corporate law. There's a defined structure in corporations regarding how they handle their affairs. The officers and board of directors share the responsibilities of making decisions. Board members are in charging of hiring and monitoring officers as well as confirming any big decisions they make.
Shareholders are in charge of electing the board, while officers are in charge of the daily operations of the company. They're in charge of handling transactions and ensuring the business runs each day. When there's a leadership structure that's defined, parties that conduct business with the corporation know that any actions of the board of directors and officers are considered legally binding for the corporation.
Owners are able to have a say when it comes to making decisions for a corporation, but they aren't in charge of running the company directly. Investors also have a right to the profits of the corporation. Oftentimes, the owner has the authority to make decisions and a part in profit sharing related to their ownership interest.
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