Self-study 1 Task

Task 8.3. Writing: Write the summary to the given text
The corporation

A corporation is a business that is legally regarded as a separate entity. An entity is defined as “something that exists independently”. That means that, as far as the law is concerned, the corporation exists separate from the people who own it. It has a life of its own. As a consequence, owners in a corporation have limited liability. With limited liability, the owners are responsible for the debts of the business only to the extent of the amount they have invested. Even if the business fails, the owners cannot lose more that they have invested. Their personal savings and possessions cannot be taken to pay the corporation’s debts. Some corporations have offices and plants in more than one country. These are called multinational corporations. Indeed, they may operate in several countries.

The original owners of the corporation may decide to issue stock, or shares in the ownership. The new owners, called stockholders, pay a certain amount for their shares, many buying the stock through a stock exchange. Each stockholder has one vote in the management of the corporation for each share of stock he or she owns.

Most companies hold an annual meeting for stockholders. In addition, they issue an annual report giving full information about the year’s activities.

Since the owners have limited liability, corporation often find it easier to get additional money by selling stock. The corporation also has unlimited life. Because it is a legal entity quite apart from the owners, the corporation does not end if one or more owners decide to sell their shares. Ownership can easily be transferred to new stockholders, and the corporation goes on.

One major disadvantage of a corporation is that it is subject to special taxes. Owners are taxed on their income from the corporation. Then the corporation itself, which is legally regarded as a person, is also taxed. In one sense, this is double taxation.

A corporation is more difficult to start than proprietorship or partnership. A charter, a legal form giving the corporation the permission to operate, must be obtained.

Corporations are more closely regulated by government than other business organizations. For instance, before a state issues a charter, an application must be filled out the owners and certain fees must be paid. Only after the application is approved and a charter is issued can the owners draw up the bylaws, or rules of operation, for the corporation. Those bylaws also outline the officers of the business.