Describe the characteristics of a corporation.

Question

What will be an ideal response?

Answer 1

A corporation is treated as an entity separate and distinct from its owners. Incorporating makes it easier to hold property over long periods of time because corporate existence is not generally threatened by the death, bankruptcy, or retirement of an individual owner. A corporation can acquire, hold, and convey property in its own name. It can also sue and be sued in its own name. The principal reason to incorporate a business today, however, is the limited liability of its shareholders. Ordinarily, the owners (shareholders) of a corporation are not personally liable for its debts; their loss is limited to their investment. Corporations often are divided into publicly held and close corporations. The stock of the close corporation is held by a family or small group of people who know one another. A publicly held corporation sells shares to people who may have little interest in it except as investors. One's status as a shareholder gives one certain ownership rights in the corporate business, although this does not include an automatic right to be an employee. However, in numerous instances, the employees of a publicly held corporation will become shareholders, and the shareholders in a close corporation will serve as employees.