What Is Corporate Law Authority?
What is corporate law authority? Corporate law governs how corporations are established and run. These laws have state and federal authority.3 min read
What is corporate law authority? Corporate law governs how corporations are established and run. These laws have state and federal authority. Corporate law can differ from state to state, but there are certain federal laws that govern all corporations in the United States.
What Is a Corporation?
Corporations are business structures that are considered their own legal entities. This means that a corporation can sue be sued as well as pay its own taxes. They are created under state law and are used to conduct some kind of business.
The owners, or shareholders, of a corporation are completely separate entities from the corporation itself in the eyes of the law and the IRS (Internal Revenue Service). Corporate shareholders are taxed on the dividends they receive from the corporation, but the corporation is also taxed on its income. This is called double taxation.
Shareholders in a corporation are not held liable for any debts or legal issues that come up with the business. This protection from liability is called the corporate veil, which can, in some cases, be "pierced."
Corporate Law Basics
Corporate law refers to any of the legal situations that can arise with corporations. There are also various rules and regulations that a corporation must follow in order to remain in "good standing" with the state or states in which they are registered. Corporations in good standing enjoy certain tax benefits and legal protection, so it's important to maintain this status.
State regulations for corporations differ somewhat, but most require corporations to keep up the following practices:
- Annual filings and fees
- Annual shareholder meetings
- Regular board of director and officer meetings
Frequently, corporations will include a business lawyer in their required meetings to make sure that they are following all state and federal regulations.
There are plenty of legal issues that corporations can come up against simply because they are a business. From employment law suits to intellectual property infringement suits, there are many situations that would require corporate law authority to come into play.
In order to handle any legal problems for the corporation, many hire their own attorneys. Small corporations usually only need one lawyer to take care of all of their legal business, but bigger corporations usually will employ several lawyers, each specializing in certain aspects of the company like contracts or employment.
Important Terms of Corporate Law
There are a few terms that are important to know when trying to understand corporate law. These include:
- S Corporation
- Piercing the corporate veil
- CEO (Chief Executive Officer)
- BOD (Board of Directors)
A corporation, as defined earlier, is a popular business structure that allows for business growth through shareholders and provides liability protection for those shareholders. There are closed corporations and public corporations. Closed corporations do not participate in public stock offerings. Instead, they are limited to a set number of owners. Public corporations trade their stock on the public stock exchange.
An S corporation is a specific type of corporation that only allows up to 100 shareholders but is not subject to double taxation.
"Piercing the corporate veil" refers to when the liability protection afforded to a corporation's shareholders is voided. This can happen when certain regulations are not followed by the corporation or when an owner fails to maintain the appropriate separation between their own personal assets and the company. For instance, the corporate veil can be pierced when a shareholder uses the corporation to break the law.
The CEO of a corporation is the top authority in the business. They make regular business decisions for the corporation and are voted into place by the board of directors.
The board of directors is the governing body of the corporation. Shareholders vote to fill the board and appoint specific officers.
Why Hire a Corporate Lawyer?
It can be complicated to keep a corporation in good standing with the state. A good corporate lawyer will focus on doing just that. The board of directors and officers of a corporation have plenty to worry about when running a corporation and usually don't have the level of experience with corporate law that a corporate attorney has.
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