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Legal Dictionary

corporation

Legal Definition of corporation

Noun

  1. A legal entity, allowed by legislation, which permits a group of people, as shareholders (for-profit companies) or members (non-profit companies), to create an organization, which can then focus on pursuing set objectives, and empowered with legal rights which are usually only reserved for individuals, such as to sue and be sued, own property, hire employees or loan and borrow money. The primary advantage of for profit corporations is that it provides its shareholders with a right to participate in the profits (by dividends) without any personal liability because the company absorbs the entire liability of the organization.

Synonymous


Definition of corporation

Etymology

    &ly; Late Latin corporatio ("assumption of a body") < Latin coporare, pp. corporatus ("to form into a body"); see corporate.

Pronunciation

  • Audio (US) [?]
  • Rhymes: -eɪʃǝn
  • (UK) IPA: /'kɔːpoˈreɪʃn/
  • (US) IPA: /ˌkɔɹpəˈɹeɪʃən/

Noun

corporation (plural corporations)

  1. A group of individuals, created by law or under authority of law, having a continuous existence independent of the existences of its members, and powers and liabilities distinct from those of its members.
  2. In Fascist Italy, a joint association of employers' and workers' representatives.
  3. (slang) A protruding belly; a paunch.

Derived terms

  • corporate veil
  • British Broadcasting Corporation

Related terms

Further reading

A corporation is an institution that is granted a charter recognizing it as a separate legal entity having its own rights, privileges, and liabilities distinct from those of its members.[1] There are many different forms of corporations, most of which are used to conduct business.

Corporations exist as a product of corporate law, and their rules balance the interests of the management who operate the corporation; creditors who loan it goods, services or money; shareholders who invest their capital; the employees who contribute their labor; and the clients they serve. People work together in corporations to produce value and generate income. In modern times, corporations have become an increasingly dominant part of economic life. People rely on corporations for employment, pensions, goods, services, economic growth and cultural development.

An important feature of corporation is limited liability. If a corporation fails, shareholders normally only stand to lose their investment, and employees will lose their jobs, but neither will be further liable for debts that remain owing to the corporation's creditors.

Despite not being natural persons, corporations are recognized by the law to have rights and responsibilities like actual people. Corporations can exercise human rights against real individuals and the state,[2] and they may be responsible for human rights violations.[3] Just as they are "born" into existence through its members obtaining a certificate of incorporation, they can "die" when they lose money into insolvency. Corporations can even be convicted of criminal offences, such as fraud and manslaughter.[4]

Although corporate law varies in different jurisdictions, there are five core characteristics of the business corporation:[5]

  • Legal personality
  • Limited liability
  • Transferable shares
  • Centralized management under a board structure
  • Shared ownership by contributors of capital.

Footnotes

  1. http://dictionary.reference.com/browse/corporation
  2. e.g. South African Constitution Art.8, especially Art.(4)
  3. Phillip I. Blumberg, The Multinational Challenge to Corporation Law: The Search for a New Corporate Personality, (1993) has a very good discussion of the controversial nature of additional rights being granted to corporations.
  4. e.g. Corporate Manslaughter and Corporate Homicide Act 2007
  5. Hansmann et al., The Anatomy of Corporate Law (2004) Ch.1, p.2; See also, C. A. Cooke, Corporation, Trust and Company: A Legal History, (1950).

References:

  1. Wiktionary. Published under the Creative Commons Attribution/Share-Alike License.



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