Running a business comes with its own sets of challenges and quirks. To be on top of your game you need to not only know the ins and outs of how your business is being run. The industry you are in and of course what your competitors are doing but also having a good understanding of the legal system also helps quite a bit.
If you found yourself wondering more about what is corporate law or you are an aspiring law student looking to get into the field then this article is for you. Knowing what is a corporation and the laws governing it. Will give you the tools for better judgment and keep you safe from legal troubles in the future. This article will give you an overview of what a corporation is. How it is viewed and treated under the country’s laws and what is corporate law.
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What You Need to Know About Corporate Law
What defines a corporation?
In broad terms a corporate is a legal entity that is created under the laws of the state with the primary intentions of doing business. Another thing of note is that under the law the corporation is treated as a separate person and is separate from its shareholders, owners and also from who own stock the company.
Since a corporation is treated as a person, a corporation can be sued or be sued as well. This treatment of the corporation also allows for anyone who owns shares of a corporation to have limited liability. Essentially meaning if in the unfortunate event the business fails. They are only responsible for the amount of money they put in. The corporation’s debts do not become a liability for the shareowner.
Why Would You Want to Incorporate as A Corporate?
One of the biggest reasons a business would want to be recognized as a corporate entity is it mitigate risks. A business gains corporate status after incorporation.
This legal process separates the assets of the business from the owners and any investor’s assets if the business happens to have any investors. This is a great way to ensure your assets and secured and do not get tied up with the business. Other benefits may include lower tax rates and an easier time when having to raise capital. Here is a detailed breakdown of some of the other benefits:
A corporation does not depend on its owners. It has unlimited life in the sense that if the owner passes away or wishes to sell, the corporation can live through.
Easy transferability of ownership:
Except for S corporations, ownership in a corporation is easily transferrable.
As mentioned becoming a corporation comes with its benefits of tax advantages. A corporate may get tax benefits such as self-employment tax savings, health insurance premium deductions that are paid on behalf of an owner-employee and more.
Incorporating as a corporation always comes with some added credibility to your business. This is because since this is such a broad and regulated area, investors and customers develop a sense of trust when a business is incorporated as a corporation.
management can be delegated to hired managers and officers. The decisions of these officers are then approved by the board of directors.
401K Plans can be easily established due to being a corporation and is another benefit for corporations?
Also, check out: Tax Refund Schedule
Disadvantages of Being a Corporation
Apart from these advantages, corporations do come with some innate disadvantages as well. chief among these are:
Depending on the type, a corporation may need to pay taxed on its income and followed by shareholders having to pay income tax on their dividends.
A large amount of paperwork:
All the kinds of taxes that are required to be paid by the corporation require an excessive amount of paperwork. However, there are some exceptions in the cases of an S corporation.
There are many formalities that corporations are required to follow, one of which is keeping proper records of initial and annual meetings between the shareholders and directors.
The Need for Corporate Law
Corporate law is put in place with the primary intention of maintaining a fair and competitive market where one corporation does not gain monopolistic power. As corporations grow and become more profitable year over year. They can become very powerful to the point that they can dictate the market.
You can see how this would be terrible for a free market. These laws make sure new players can enter into the market and compete which in turn benefits the consumers. Without these laws active, there is the risk of corporations becoming too powerful with a lot of influence over the market.
Q. When do I need to hire a corporate lawyer?
Ans. Having a corporate lawyer will help you in various stages of setting up a business, drafting a contract and also when dealing with insurance companies.
Q. How much does hiring a corporate lawyer cost?
Ans. The costing will always depend on the scope of work. As it is with most lawyers and law firms, you can discuss the scope of work and type of work that needs to be done. The cost will be calculated based on discussions.
Q. Should address business as fast as possible?
Ans. Yes, any sort of business disputes should be addressed as fast as possible. Since it gives time for both you and your lawyer to try to negotiate and not escalate the matter any further.
Corporate law is one of the more complex areas of law that is practiced today. This article should be a good way to get your foot in the door when it comes to corporate law. It is always advisable when you need legal advice, that you hire a professional or associate yourself with a law firm that is specialized in the area of that specific law.
Don’t forget to check out: The Perks of Being a Tax Accountant