If you run a corporation, it’s important to understand the basics of corporate law: the laws related to how a corporation operates, from formation to funding, and even its demise. Understanding this “life cycle” is paramount to operating a successful commercial business.
Read on to learn more about understanding corporate law as we head into 2023, from the legal experts at Handin Law.
What Is Corporate Law?
“Corporate law” refers to laws related to business corporations: the rules, regulations, and practices that must be followed in order to enjoy certain tax and additional legal benefits. These laws control how a corporation is formed and conducted throughout its lifetime.
There are at least five components that comprise corporate law:
1. Legal Personality
Those who own a corporation must have a separate entity for their resources. These assets can be utilized in order to sell, or otherwise use for other purposes. These assets can’t be easily taken by creditors; they must form a separate entity, or “personality,” for separate purposes.
2. Limited Liability
This is one benefit that corporations are allowed under corporate law. Limited liability is relevant if a corporation gets sued: only the corporation’s assets are at risk in the lawsuit. Plaintiffs of a lawsuit are not legally allowed to seek assets from a corporation’s owner.
3. Owners May Transfer Shares
Should an owner decide to pursue another venture and cease ownership of a corporation, the business can still remain active. Owners can choose to transfer the shares to a new owner, without the hassle that comes with transferring ownership when in a traditional business partnership.
4. Delegated Management
Corporation affairs must be handled in a very specific way. That structure involved a certain board of directors, who are elected by the shareholders who then appoint the officers of the corporation who all share responsibility in making business decisions. Among their responsibilities includes hiring and monitoring officers and other employees before any big decisions are made.
Corporate Law Terms To Know
Every branch of law has its unique lingo; corporate law is no different. Below are some of the key terms to know:
- Corporation. The legal entity formed for conducting a particular business. It can be private, with only a few owners, or a public one, in which stock is traded.
- S Corporation. This is not a legal designation, but rather a determination made by the shareholders as to how they wish to be taxed. This type of corporation has a limited number of shareholders with certain tax benefits. However, it lacks the stock options of a typical corporation. The gains or losses of the corporation flow through to the shareholders’ personal income tax returns.
- C Corporation. Also called a C-Corp, this is an accounting decision structure in which shareholders get taxed separately from the rest of the business entity. It’s the most common type of large or public corporations and is subject to income taxes at both a corporate and personal level. Accordingly, this means C-corps have “double taxation.”
Corporate Law And More In South Florida
Choosing the type of business you want to run can be overwhelming and confusing. The factors that go into this decision include your goals for the business, who you share it with, what type of services are offered, and more.
The legal team at Handin Law in Coral Springs can help walk you through the ins and outs of corporate law so you can have a successful and profitable 2023. To learn more about our legal services, call today at 954-796-9600.