Question

In: Finance

Explain features of corporation

Explain features of corporation

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Expert Solution

A) Introduction:

  • A corporation is an organisation, comprising of group of people or smaller companies having certain business objectives and policies. Most commonly, the organisations or entities are registered as a corporation.
  • Corporations are of different types, profit making or non-profit making organisations, private limited or public limited and so on.
  • Its existence is inevitable and all sectors of business, industries and services have well-established corporations. In any country, corporations serves as a backbone of the economy.

(B) Features or Characteristics of Corporations which distinguishes it from other organisations are as follows:

a) Corporations has its separate legal personality: It is considered separate from all of its stakeholders and is enabled by law to carry on its own business, own its properties, make payment of all the mandatory taxes, borrow money from other entities, can sue and be sued.

b) Corporations have Perpetual life span: Being an artificial person, factors such as death, retirement, insolvency, insanity does not affects the status of a corporation and it thereby remains perpetual. In short, corporations life span extends beyond the life span of humans.

c) Corporations grants Limited liability to its owner: Any loans & debts against the corporation, mortgages or any lawsuits filed against it is the sole responsibility of the company, members of the coporations are not liable for it. Liability of its members is limited to their shareholdings or limited by an amount guaranteed by them.  

d) Corporations are professionally managed: Shareholders elects the board of directors, who are appointed for carrying out & executing the activities and day-to-day business operations on behalf of corporation.

e) Enables transferability of shares: Shareholders of the corporations can use its descretion to sell or transfer its shares, without any restrictions. However, it should be noted that in case of private limited companies, shareholders might be imposed with certain restrictions as to the transferability of shares.


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