Corporate Laws
Although a corporation is actually something that is made up and not a person, they still have the power to sue or be sued. Therefore, a corporation is almost like a person legally. Under corporate law, corporations also have to file income tax returns just a like a person would. Corporate law, or company law as it is sometimes called, governs the creation, structure and dissolution of all corporations. Corporate laws are very powerful and corporate laws have to be followed by business owners, even if their corporation is small.
•Corporate law can be very complicated, and sometimes understanding corporate laws is something that is best left to the experts. However, an individual should have some knowledge of corporate law, whether they are a shareholder or a corporation owner. Some corporate laws involve personal liability for creditors. When an individual starts a corporation, it protects any shareholders from personal liability to the creditors of the corporation. Under corporate law, it does not matter is there are 1000 shareholders or three. This corporate law is meant to encourage people to invest their money in business ventures without having to worry about losing their life savings or personal property. Corporate laws protect both shareholders and business owners. Corporate laws require corporations to officially register with the state in which they incorporated.
•Different corporate laws apply to different types of corporations. There are two types of corporations. These are private corporations and public corporations, both with different corporate laws that govern them. Under corporate law, a private corporation is usually allowed to sell shares to qualified investors like institutional investors. Corporate law states that any buyers be limited in their ability to resell them to others. In part, this is because corporate law requires a public corporation to sell shares on a public exchange. While these corporate laws are very important, some of the most important corporate laws govern corporate taxes that must be paid. In principle, under corporate law, no corporation is exempt from paying taxes. In practice, it is another matter.
•Because of the corporate laws governing taxes paid by corporations, some people complain that this amounts to double taxation. That is because corporate law requires that the corporation be taxed on income that it receives as a company; this same income is taxed again as individual income tax when it is distributed as dividends and salaries. However, corporate law requires that any corporation earnings that qualify under Subchapter S of the Internal Revenue Code be taxed only at the level of shareholder, not in addition to the corporation level of taxation. In this way, corporate laws try to protect the corporations from paying too much in taxes.
Corporate laws are meant to protect both shareholders and the actual corporation, although it may seem like they only protect the corporation at times. It is important for any individual who plans on starting a corporation or investing in a corporation has a general knowledge of corporate laws.
