Advantages of the Corporate Structure
A company is a legal entity created separately from those who own and operate it. As a separate entity, the company's debts and taxes are separate from its owners (shareholders), thereby, offering the greatest personal liability protection of all business structures.
A company is an artificial "legal" person. It is owned by shareholders who have limited liability (i.e., they are not personally responsible for the company’s debts). A company is run by directors.
Because the company continues to exist even after the death of a shareholder, it offers tremendous estate planning advantages. In addition to liability protection, incorporating offers attractive tax advantages, better financing and the ability to raise cash.
The main advantage of a Limited Company is to separate business risk from the shareholder's personal assets and a possibility to limit the amount of money that a business proprietor owes personally.
A Company allows shareholders to limit their maximum possible liability for the debts of that Company to the amount of the paid capital in the Company. If a shareholder holds hundred $1.00 shares in a Company, that shareholder's liability for the company's debts is limited to $100.00. Shareholders are only liable for any unpaid shares and any debts that have been personally guaranteed. That's in contrast to the position of a sole trader or partner in a firm who is liable for the debts of that business unlimited.
Whilst there are still common law grounds for the protection of an unregistered name, forming a Company is a way to formally register a Business name and therefore notifying the world of a name's existence.
Once the Registrar of Companies approves the Company name no other Company can be registered with the identical or near identical name.
There is no register for unincorporated bodies such as partnerships or sole traders.
Additional name protection can be archived through registering a Trademark or Service Mark with the Commissioner of Trademarks.
A Company is a separate legal entity from its shareholders.
An individual cannot enter into a contract with him but a shareholder can enter into a contract with the Company. Therefore a shareholder may be employed by the Company or may loan money to the Company on the same basis as any other unrelated party.
A Company gives different opportunities for raising capital. This may be by issuing of new shares (the purchase of which, by the new shareholders, brings capital into the Company) or by offering the Company as security (or collateral) for any mortgage or debenture that the Company takes on gives the lender more options and therefore more security.
Corporation – “A business organization that exists as a legal entity and provides limited liability to its owners.” (Longenecker, Petty, Palich, Hoy, Pg. 205) The main advantage of a corporation is that the business liability falls onto this entity instead of the individuals that own it. The disadvantages of this organization are found mostly in its formation. A corporation is expensive to create and requires compliance with state
The Economic Dimension: Do corporations benefit from shareholders limited liability if so how? For example, the company should obtain insurance, and if the company is sued the defendant is not held liable. If someone sues the insurance company is held liable. The law firm argued that court should pierce the business veil, because did not observe corporate formality, and because Brennan brothers did not honor their promises to pay their legal bills. Generally, shareholders are not personally liable for corporate acts.
On one hand, businesses must be profitable to survive and corporations must earn a higher return on the shareholders equity than would be realized if the money were deposited on a no-risk bank account. The profits that are made create trust from investors and are usually reflected in higher stock-prices, which makes it easier to grow the company further towards its goals. The profits are not only a result, but also a source of corporate competitive health and wealth. On the other hand, companies are networks of parties and people working together towards a shared goal and not merely 'economic machines'.
A nice advantage to owning a S corporation is that it is limited liability which means that the owner/owners of the company
Corporations create two kinds of securities: bonds, representing debt, and stocks, representing ownership or equity interest in their operations. (In Great Britain, the term stock ordinarily refers to a loan, whereas the equity segment is called
Over the years, the sole pursuit of managerial capitalism, the basis of the Stockholder Theory, in its unconstrained manner through deception and manipulation has resulted in the promulgation of laws to protect the interests of stakeholders...
“…separate legal entity possessed of separate legal rights and liabilities so that the rights of one company in a group cannot be exercised by another company in that group …”
In the world we live in today lawsuits are prevalent and being sued by someone could cause the business to fold. It would be wise for one to obtain all the knowledge before starting a business and it is a reason why people use the term “knowledge is power” (Clarkson & Miller, 2012). As individuals, when we lack knowledge we perform practices unknowingly which could lead to major lawsuits. Ownership of a business can be formed as sole proprietorship, partnership, or corporation. Potential great profit is the reason most people want to start and some do start corporations. One must have knowledge, and understand business law in order to have a positive outcome with operating an organization (Clarkson & Miller, 2012).
A registered company, as an artificial person is separate from its members and exists only by virtue of the Companies Act under which it is incorporated. When a business is incorporated, it becomes a separate legal entity and, therefore, can be sued and sue without affecting the shareholders personal assets. This was established in “Salomon v A Salomon Co.Ltd”. Separate legal personality is known as the veil of Incorporation. This protects the shareholder and places the responsibility of the company onto the directors. These duties are outlined in the Companies act 2014.
Public companies are any company that has stock available to the public to buy. A company that wishes to set up a new business or expand its existing business can raise the capital it requires either by borrowing money or by issuing shares to investors. The investors become shareholders in the company, meaning they are part owners of the company and share in its profits and growth. These stocks represent how well the company is doing. When the accounting books are tampered with to show the company is thriving when debt is actually accumulating is when investors lose all their shares because they fall all of a sudden and lose all worth; without any warning. Companies wishing to have their shares traded must first be listed. To become listed, a company must be large enough for there to be a market in its shares and it must agree to abide by the listing rules which, with other things, require it to keep the market informed of its activities and to regularly report profits and other financial information (Flint). Auditing firms have been overlooking figures and hiding debt from the public for their high paying companies. This is where our corporations have gone astray and started to cheat their investors by deception because of conflicts of interest of...
With a provision of funds by debt, the owner will have such benefit, which is retained control of the company
A corporation under Company law or corporate law is specifically referred to as a "legal person"- as a subject of rights and duties that is capable of owning real property, entering into contracts, and having the ability to sue and be sued in its own name. In other words, a corporation is an artificial person that in most instances is legally treated as a person, and empowered with the attributes to own its own property, execute contracts, as well as ability to sue and be sued. One of the main motivations for forming a corporation or company is the limited liability it offers its shareholders. By this doctrine (limited liability), a shareholder can only lose only what he or she has contributed as shares to the corporate entity and nothing more. The case of Salomon V. Salomon & Co., commonly referred to as the Salomon case, is both the foundational case and precedence for the doctrine of corporate
Under corporate business law, stockholders are the owners of the corporation. But, considering the complexities of the daily operations of the corporation, each stockholder may not be given an authority to control its operation. Instead, they appoint directors among them, who likewise appoint officers or executives to manage the corporation.
In company law, registered companies are complicated with the concepts of separate legal personality as the courts do not have a definite rule on when to lift the corporate veil. The concept of ‘Separate legal personality’ is created under the Companies Act 1862 and the significance of this concept is being recognized in the Companies Act 2006 nowadays. In order to avoid personal liability, it assures that individuals are sanctioned to incorporate companies to separate their business and personal affairs. The ‘separate legal personality’ principle was further reaffirmed in the courts through the decision of Salomon v Salomon & Co Ltd. , and it sets the rock in which our company law rests which stated that the legal entity distinct from its
Corporate debt is a large topic. Within this topic there are many different advantages and disadvantages of corporate debt. One advantage of corporate debt is that it is a cheaper source of fund than equity up to a certain limit. Another advantage is it does not dilute the ownership of the company. Another advantage is that interest is tax deductible. It is an advantage that it increases the payout to equity stock holders when the company performs well. One last advantage is that it can be obtained for short term and long terms based on requirement. One disadvantage of corporate debt is that the payments of interest and principal must be made in time and the firm needs to have enough cash flow in time to manage that. Another disadvantage