What Makes a Company a Corporation?
So, what makes a company a corporation? Many people ask that same question and it is not as simple as answering “because it is what makes a company a corporation.” When people are asked to define corporation in the context of law or in the context of their daily lives, they cannot agree on a single definition. While many people would readily say that a corporation is a legally defined entity which can be recognized as a separate and distinct legal body recognized by law, some people define a corporation differently. The difficulty arises when people attempt to draw a clear line between what they consider to be a corporation and what they consider to be a partnership.
A corporation is considered to be a legal entity by most jurisdictions. Almost all countries outside the United States have laws which recognize corporations as legal entities. What this means for the person asking the question what makes a company a corporation, is that a corporation can be formally established in any court of law. Once created, a corporation can legally operate. To conduct business, a corporation must take its orders from a public proceeding known as a corporation registration.
But what makes a company a partnership? A partnership is nothing more than a group of individuals who work together in order to conduct business. There is often a board of directors and various corporate officers. These officers and directors make decisions concerning the business operations of the partnership. While some partnerships are formal corporations where all of the partners meet in an office and transact business under the supervision of a board of directors, other partnerships are informal partnerships that meet in homes, offices, restaurants, clubs, and so forth.
An informal partnership may include a sole proprietorship, which is one of the most common forms of partnerships in the United States, or a Limited Liability Company (LLC). Limited Liability Companies, or LLCs, are able to carry on business in many different ways than traditional corporations, but have the disadvantage of only being able to carry on business in specific states or for a limited amount of time in those states. What makes a company a corporation in these cases is the fact that all transactions and activities will be held and conducted according to state law and any questions about what makes a company a corporation must be directed to a legal counsel for clarity.
Formally incorporating a company is what makes a company a corporation. In addition to paying fees for the services of attorneys and business formsulators, you will pay a fee for the filing fees and will need to pay the filing fees plus an additional statutory fee. Furthermore, if your state requires an annual filing of the corporation papers then you will also need to pay for that fee. The statutory fee is based on your state’s laws on corporation filing.
Forming the company will require filing an Articles of Organization with the secretary of state. An Articles of Organization is not considered by the court as being important as the actual corporation papers, but it is still a requirement and a necessary step in what makes a company a corporation. After drafting your Articles of Organization, the company must submit them to the secretary of state and then wait for the approval. Once approval is received, the company can now file with the appropriate agencies to incorporate. The Articles of Organization must include the name of the company, the names of all members of the board of directors, the date the company becomes a corporation, and its address in the state.
When the company becomes a corporation, it will then undergo what makes a company a public company. Each state has several requirements that must be met before the corporation can file. In addition to the Articles of Organization, the company must also submit Articles of Operating Agreement and also a by-laws. Operating Agreement will set out all the policies of the corporation, while the by-laws may set out the methods by which the corporation will conduct its business. After approval, the corporation will issue stock in the form of stock certificates. Each stock certificate represents a share of the company’s stock.
The most important thing about what makes a company a corporation is that it meets the legal requirements. All the other requirements are secondary. While it’s important for a company to meet the state requirements, it’s even more important for it to meet the federal requirements as well. When you’re ready to start your own corporation, you’ll find that there are hundreds of different styles to choose from so finding the best one for your purposes should be relatively easy. As long as you’re prepared to invest a lot of time and legwork into making sure your corporation is properly formed and legally certified, it should be just fine.