Separate Existence. A corporation through legal fiction has it own legal existence and with that existence come economic rights. Some of those rights are: the right too enter into a contract; due process protection of corporate assets against state and federal government takings; freedom of commercial speech in the form of advertisements; and equal protection of the Fourteenth Amendment. A corporation does not have individual rights such as: the 5th amendment right to protection against self incrimination, the 4th amendment protection against unreasonable search and seizure or the 1st amendment protection of political free speech. Because of this separate existence created by legal fiction, a corporation can exist beyond the lives of it’s shareholders.
Centralized Management. Corporate law provides an organizational structure to operate the business and the capital of many individuals. The basic structure is as follows. Shareholders are the owners of the corporation, directors are elected by the shareholders and are the locus of power. Directors appoint the corporate officers. Directors approve policy and procedures of the operations of the corporation. Corporate officers carry on the day to day activities of the corporation and serve at the pleasure of the board of directors.
Transferability of Ownership Interest. The issuance of shares creates a kind of currency in with value based on the assets owned by the corporation or the financial performance of the corporation. Shares facilitate transferability of ownership. This enhances the marketability of the entity and allows for an exit strategy for the owners.
Limited Liability. A corporation shields its owners from personal liability for the debt of the corporation.
Author: Mark W. Bidwell