Characteristics of a Corporation

In: Computers and Technology

Submitted By faitharquillo
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Characteristics of a Corporation

A corporation is a legal entity, meaning it is a separate entity from its owners who are called stockholders. A corporation is treated as a “person” with most of the rights and obligations of a real person. A corporation is not allowed to hold public office or vote, but it does pay income taxes. It may be established as a profit making or nonprofit organization and may be publicly or privately held. The stock of a public company is traded on a stock exchange. There may be thousands, even millions, of stockholders in a public company. Stock of a privately held company is not traded on an exchange and there are usually only a small number of stockholders.

To be recognized as a corporation, a business must file an application that includes the corporation's articles of incorporation (charter) with the State, pay an incorporation fee, and be approved by the State. Once the approval is received, the corporation must develop its bylaws. Organization costs, including legal fees, underwriters' fees for stock and bond issues, and incorporation fees, are recorded as an intangible asset and amortized over a period of time not to exceed 40 years.
Ownership in a corporation is represented by stock certificates, which is why the owners are called stockholders. Stockholders have the right to: vote for the members of the Board of Directors and any other items requiring stockholders action; receive dividends when authorized by the Board of Directors; have first right of refusal when additional shares are issued, thereby allowing the stockholder to maintain the same ownership percentage of the company before and after the new shares are issued (called a pre‐emptive right); and share in assets up to their investment, if the company is liquidated. In some states, stockholders are called shareholders.
A number of characteristics distinguish a…...

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