Incorporation creates a separate legal body, often a business corporation, but also potentially a nonprofit, sports club, or municipal entity. This lesson introduces the corporate form and explains the key legal benefits it may provide.
Incorporation is the formation of a new corporate body. A corporation is legally distinct from the individuals who own or manage it. Depending on the context, the term can refer to a business or nonprofit organization, a sports club, or a local government formed as a municipal corporation.
All flashcards
Incorporation
The formation of a corporate body that is legally distinct from the individuals who own or manage it.
Limited liability
A general principle that a shareholder is not personally liable for corporate debts merely by holding shares; exposure is typically limited to the investment.
Corporate property and shareholder debt
A shareholder’s personal creditor generally cannot take corporate property to pay the shareholder’s debt, though the shares themselves may be reachable.
Corporate continuity
A corporation can generally continue to exist despite the death or departure of its owners or managers.
Articles and bylaws
Articles establish key formation details; bylaws set internal administrative and governance rules.
Quiz questions
Which U.S. Supreme Court case struck down a Massachusetts restriction on certain corporate political spending concerning public issues?Answer: First National Bank of Boston v. Bellotti
What type of political spending did Citizens United v. FEC treat as protected political speech?Answer: Independent political spending, distinguished from direct campaign contributions
What did Liggett v. Lee uphold as a possible criterion in corporate tax legislation?Answer: The corporation’s business structure
A company incorporated federally in Canada will generally need what to do to conduct business in a province?Answer: Register extra-provincially in that province
What preferential treatment may preferred shares receive when a corporation is wound up?Answer: Priority in distributions of assets