Question

summarize the importance of understanding and adhering to the regulations of each state when forming a corporation. Discuss some consequences if an organization does not properly follow the regulations.

Answer 1

To understand why it is important to understand and adhere to the regulations of each state when forming a corporation, it is important to know the meaning of a corporation and how it is formed. Corporation is a legal entity that is seperate from its owners. As it is a seperate entity from its owners, it is taxed and held liable for its actions legally. Due to this complex struture of a corporation it is formed under the laws of the state and is bound by their regulations.It is taxed like an individual. It holds a legal entity and requires licences and permits for its incorporation. Hence any of its business activities and its identity itself is a legal entity so in forming a corporation understanding and adhering to the regulations of the state is important.

As corporation is a legal entity by itself, once formed it is liable to follow all regulations that it is bound to. The legal formalities and regulations that the organization will have to follow will not be informed to it but it has to have full knowledge and information clear through an attorney to function its activities legally. Not abiding by the rules and regulations of the state can put the corporation into many adverse situations like facing lawsuits, audits by government agencies, huge fines and legal fees and all these may even result to dissolving or closure of the business entirely.