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corporation

n. an organization formed with state governmental approval to act as an artificial person to carry on business (or other activities), which can sue or be sued, and (unless it is non-profit) can issue shares of stock to raise funds with which to start a business or increase its capital. One benefit is that a corporation's liability for damages or debts is limited to its assets, so the shareholders and officers are protected from personal claims, unless they commit fraud. For private business corporations the articles of incorporation filed with the Secretary of State of the incorporating state must include certain information, including the name of the responsible party or parties (incorporators and agent for acceptance of service), the amount of stock it will be authorized to issue, and its purpose. In some states the purpose may be a general statement of any purpose allowed by law, while others require greater specificity. Corporation shareholders elect a board of directors, which in turn adopts bylaws, chooses the officers and hires top management (which in smaller corporations are often the directors and/or shareholders). Annual meetings are required of both the shareholders and the board, and major policy decisions must be made by resolution of the board (which often delegates much authority to officers and committees). Issuance of stock of less than $300,000, with no public solicitation and relatively few shareholders, is either automatically approved by the state commissioner of corporations or requires a petition outlining the financing. Some states are considered lax in supervision, have low filing fees and corporate taxes and are popular incorporation states, but corporations must register with Secretaries of State of other states where they do substantial business as a "foreign" corporation. Larger stock offerings and/or those offered to the general public require approval by the Securities and Exchange Commission after close scrutiny and approval of a public "prospectus" which details the entire operation of the corporation. There are also non-profit (or not for profit) corporations organized for religious, educational, charitable or public service purposes. Public corporations are those formed by a municipal, state or federal government for public purposes such as operating a dam and utility project. A close corporation is made up of a handful of shareholders with a working or familial connection which is permitted to operate informally without resolutions and regular board meetings. A de jure corporation is one that is formally operated under the law, while a de facto corporation is one which operates as if it were legal, but without the articles of incorporation being valid. Corporations can range from the Corner Mini-Mart to General Electric.

See also: board of directors  bylaws  close corporation  de facto corporation  de jure corporation  non-profit corporation  public corporation  securities  articles of incorporation 

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The People's Law Dictionary by Gerald and Kathleen Hill Publisher Fine Communications

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