Corporate Law for Small Business Owners

Corporate law is the set of laws that govern a corporation. It deals with issues like governance, contracts, and shareholder activity. Corporate lawyers usually work for medium or large law firms.


A corporation is a separate legal entity that treats its assets as its own property. It can be sued by its shareholders or investors, but the plaintiff can only go after the corporation’s assets.

Formation of a corporation

The formation of a corporation is an important first step for any small business owner. A corporation is a legal entity recognized by the state as separate from its owners (or shareholders). Its separate legal personality makes it easier to raise large sums of capital, and it also protects shareholders from personal liability for the corporation’s debts. Observing all corporate formalities is essential to ensure that the corporation is truly a separate entity. Failure to do so could result in someone suing the corporation for damages, which the shareholders would be liable for.

After a corporation is formed, it should draft its legal documents, including bylaws and a records book. These documents should note the rules that govern the corporation and how those in charge are nominated, elected, and removed. They should also specify how the corporation conducts business and record the company’s financial transactions. Finally, the corporation should issue stock to its shareholders. This should be done by following the procedures set out in the bylaws. It should also make a record of the number of shares issued and the price paid for them.

Officers of a corporation

Corporations have a complex structure that requires compliance with many state and federal laws. These rules, which support commerce and ensure that all parties are treated fairly, set the framework for how corporations operate. They also dictate the responsibilities of those who work for and with them. The law defines a corporate officer as any person who provides more than a minor service to a corporation and receives or is entitled to payments. This includes both directors and shareholders. These payments are considered wages and may be subject to FICA, FUTA, and federal employment taxes.

Because corporations are a legal entity separate from their stakeholders, officers of a corporation are typically insulated from personal liability. However, they must still abide by their fiduciary duties and maintain an ongoing awareness of business operations. In addition, they must document that they follow all compliance requirements. This will help protect them from personal liability if the company fails to meet its financial obligations. These obligations include recording transactions and maintaining accurate financial records. They also include ensuring that the corporation is in good standing and that its internal management is in compliance with company bylaws.

Owners of a corporation

The owners of a corporation are the people who invest capital in the company. They are able to have a say in decisions, and may receive profits in proportion to their ownership interest. They also benefit from liability protection, meaning that they are not personally liable for the actions of the corporation.

Corporations can be either for-profit or not-for-profit. Investors can contribute cash, property or services in exchange for stock in the corporation. Corporations must abide by corporate laws, including creating bylaws and meeting regularly with shareholders and directors. They must also have a registered agent, who will accept service of process and official mail on behalf of the corporation.

Corporations typically delegate management responsibilities to a board of directors and officers. Directors are responsible for overseeing the company’s activities, while officers handle daily operations. This leadership structure is known as delegated management, and it helps to maintain a clear line of separation between shareholders and management. A person who wishes to take control of a corporation can acquire the necessary shares, or may engage in a proxy fight.

Taxes on corporations

Corporations are legal entities that pay income taxes and can be held liable for the actions of their directors and officers. The tax rates on corporations are set by state law and vary widely. The taxes on corporations are based on the company’s net taxable income, which is defined as gross business income less allowable tax deductions. This definition excludes interest and investment expenses, but includes other current business costs such as salaries and bonuses. Taxable profits also include money kept in the company to cover expenses or for future growth, as well as dividends paid to shareholders. Corporations may file a single return or a consolidated return for federal and some state income taxes. Groups of corporations owned or controlled by common owners may file a consolidated return that reflects the combined income, deductions, and credits for all members of the group, without intercompany eliminations.

A recent ITEP study found that more than a third of profitable U.S. corporations paid no taxes on their profits in the past year. This is a sign that the corporate tax system is too easy for big corporations to game. The Tax Cuts and Jobs Act reduced the top corporate tax rate to 21 percent from 35 percent.

Regulations on corporations

Whether or not you are a business owner, it is important to stay up-to-date on the rules and regulations that affect your company. These codes and regulations are meant to ensure health, safety, fairness and a competitive business environment. However, opinions on how these laws help or hinder businesses vary.

Corporations are considered legal persons in many jurisdictions, and are able to enter into contracts, sue and be sued, own assets, pay taxes, hire employees, and even vote in elections. Moreover, they are also required to disclose information on their activities to the public. This is a major disadvantage for Sam, who will lose the confidentiality of his business strategy.

While the law relating to corporations is complex and varies from country to country, it is generally based on the principle of separate legal personality. This means that third parties are entitled to rely on the ostensible authority of a company’s agents, as long as the agents are not abusing their powers. In addition, a number of court cases have confirmed that companies are treated as real entities with rights and duties of their own.