What is a Corporation?

by Investing School on December 2, 2009

We hear this word all the time but do we know exactly what it means? A corporation is a legal entity or business organization that is separate from its owners. A corporation is given many legal rights and is chartered by the state in which it is recognized as a corporation. The term has different meanings in the UK and in the US. In the US, it means a body or entity that is formed to conduct business. This meaning is gaining international usage.

Corporations are a product of corporate law and the law is there to balance the interests of several parties; management, creditors and shareholders. In present day, corporations have become an increasingly prominent part of economic life. Many people who work in business rely on corporations for their source of employment, and corporations provide goods and services which is another necessity of modern life.

There is an important feature of a corporation and that is limited liability. This means that if a corporation fails then the shareholders will only lose their investment and employees will lose their jobs. However, neither party will be liable for further obligations that are related to the corporation.

In America, corporations also have the same rights that are recognized under the Constitution of the United States. Corporations are free to exercise human rights and are even responsible for human rights violations if there is such a breach.

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