Frequently Asked Questions

What are the characteristics of a corporation under state laws?

Corporations are legal business entities governed by state laws, with characteristics that vary from state to state. However, universally, corporations are recognized as separate legal entities from their owners, capable of suing and being sued, entering contracts, opening bank accounts, applying for loans, and conducting other business functions independently. One of the key characteristics of a corporation is the provision of limited personal liability for business debts and obligations, thereby protecting shareholder assets. Exceptions to this rule include cases of fraud and unpaid business taxes. Corporations also benefit from lower tax rates compared to individual tax rates. Another important characteristic is the continuity of a corporation's existence. A corporation continues to exist until it is formally dissolved under the procedures established by the state of formation, regardless of changes in ownership or management. If a corporation wishes to conduct business in another state, it is typically required to incorporate as a foreign entity in that state. Certain industries, such as public transportation and telecommunications, are subject to federal laws, licensing, and regulations. Therefore, corporations must adhere to federal laws like the Securities Act of 1933, which governs the issue and sale of corporate securities.