Corporation

Definition

A corporation is a succession of persons or a body of persons authorized by law to act as one single entity. It possesses rights and liabilities that are distinct from the individuals forming it, often created through Royal Charter, statute, or common law. This legal construct may come into existence as a registered company formed under the Companies Act or other legal frameworks.

Types of Corporations

Corporation Sole: This type encompasses a single individual fulfilling a particular role, such as a bishop or the sovereign. It enables continuity of office independent of the office holder.
Corporation Aggregate: This involves a group of individuals, such as a limited company. It is formed for general or specific purposes, with the British Broadcasting Corporation (BBC) being an example created by statute.

Key Features

Distinct Legal Entity: Corporations are treated as separate legal entities to the individuals forming them.
Property Ownership: They can own property in their names.
Business Operations: Corporations can carry on business and enter into contracts.
Legal Actions: They can sue and be sued in their own name.

Examples

Apple Inc.: A leading corporation in technology and consumer electronics.
The BBC: A statutory corporation for broadcasting in the UK.
HSBC Holdings plc: An international bank and financial services corporation.

Frequently Asked Questions

Q1: What is the difference between a Corporation Sole and a Corporation Aggregate?
A1: A Corporation Sole consists of a single individual fulfilling a public function, ensuring continuity beyond the individual’s tenure (e.g., the sovereign). In contrast, a Corporation Aggregate involves multiple individuals operating as one entity, typically a registered company under law (e.g., a limited company).

Q2: How is a corporation legally created?
A2: Corporations can be created by Royal Charter, statute, or common law. Registered companies are commonly set up under the guidelines and regulations of the Companies Act or similar legislative acts.

Q3: Can corporations hold property?
A3: Yes, corporations can hold property in their names, which distinguishes them from partnerships or sole proprietorships where ownership is not legally separate from individual owners.

Q4: Why are corporations considered “artificial persons”?
A4: Corporations are termed “artificial persons” as they are legal entities created by law to act as single persons with rights and responsibilities, distinct from the natural persons comprising them.

Registered Company: An entity formed under the Companies Act, commonly a type of Corporation Aggregate.
Domestic Corporation: A corporation conducting its business in the state where it is incorporated.
Artificial Person: A legal entity, identified by law as having rights and responsibilities like that of a natural person.
Limited Liability: A characteristic of corporations where investors’ liability for the company’s debts is limited to their invested capital.

Online References

Suggested Books for Further Studies

“Company Law” by Alan Dignam and John Lowry
A comprehensive guide to understanding the principles and intricacies of company law.
“The Modern Corporation and Private Property” by Adolf A. Berle and Gardiner C. Means
A historical look into the nature and control of corporations.
“Fundamentals of Business Law: Summarized Cases” by Roger LeRoy Miller
An overview of key concepts in business law, including corporations and commercial law.
“Corporate Finance: Theory and Practice” by Aswath Damodaran
A detailed examination of financial principles in the corporate world.

Accounting Basics: “Corporation” Fundamentals Quiz

### What is the defining characteristic of a corporation? - [ ] It always involves multiple people. - [ ] It cannot own property. - [ ] It acts as a single entity with separate legal rights and liabilities. - [x] It must be created by Royal Charter. > **Explanation:** The defining characteristic of a corporation is that it acts as a single entity with separate legal rights and liabilities. It does not necessarily need to be created by Royal Charter. ### Which type of corporation involves only one individual? - [x] Corporation Sole - [ ] Corporation Aggregate - [ ] Limited Liability Company - [ ] Partnership > **Explanation:** A Corporation Sole involves only one individual, generally holding a public or ecclesiastical office, to ensure continuity of office beyond the tenure of the office holder. ### What legislation commonly governs the formation of registered companies? - [x] Companies Act - [ ] General Partnership Law - [ ] Trust Act - [ ] Charities Act > **Explanation:** The Companies Act is commonly the legislation under which registered companies are formed, governing their formation, administration, and governance. ### Can a corporation be sued in its own name? - [x] Yes - [ ] No, it cannot be directly sued. - [ ] Only the individuals within the corporation can be sued. - [ ] Only in cases of fraud. > **Explanation:** A corporation can indeed be sued in its own name, as it is treated as a separate legal entity from the individuals forming it. ### Which entity is an example of a Corporation Sole? - [ ] Board of Trustees - [x] The sovereign - [ ] Apple Inc. - [ ] United Nations > **Explanation:** The sovereign is an example of a Corporation Sole, continuing the legal existence beyond individual office holders. ### What is an example of a Corporation Aggregate? - [ ] The Governor - [ ] The Board of Education - [x] Apple Inc. - [ ] The Chancellor > **Explanation:** Apple Inc. is an example of a Corporation Aggregate, composed of multiple individuals forming a single legal entity. ### Why might businesses choose to form a corporation? - [ ] To avoid taxes - [ ] To ensure ownership does not change - [x] For limited liability protection and continuity - [ ] For flexible lending options > **Explanation:** Businesses often form corporations for limited liability protection, ensuring that the shareholders' financial obligation is limited to their investment in the company, and for continuity of the entity beyond individual members’ tenure. ### What type of corporation is typically used for public broadcasting? - [ ] Limited Liability Company - [ ] Partnership - [x] Statutory Corporation - [ ] Corporation Sole > **Explanation:** Statutory Corporations like the BBC are often used for public broadcasting, created by statute for a specific purpose. ### How are corporations regarded in terms of legal personhood? - [ ] They are considered the same as natural persons. - [ ] They do not have legal personhood. - [ ] They are considered ‘Artificial Persons.’ - [x] They do not have economic responsibility. > **Explanation:** Corporations are considered 'Artificial Persons,' meaning they have legal personhood with rights and duties distinct from their members. ### What is a Domestic Corporation? - [ ] A corporation operating within its incorporation state. - [ ] A corporation with international operations. - [x] A corporation operating outside its incorporation state. - [ ] A corporation formed for charitable purposes. > **Explanation:** A Domestic Corporation operates within the state where it is incorporated, subject to that state’s legal regulations.

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