Civil Law Chambers In Bangladesh

A corporation is an artificial being, invisible, intangible; existing only in contemplation of law. It has neither a mind nor a body of its own. – Explain and illustrate.

1. Introduction:

A corporation is separate legal entity that is run by stockholders having limited liability. [1]The entity’s continuation is considered separate and different from that of its members. Like an actual person, a corporation can go through into contracts, sue and be sued, pay taxes separately from its owners, and do the other things necessary to conduct business.

In a common sense, a corporation is a business entity that is given a lot of the same legal rights as a real person. Corporations may be made up of an individual or a collection of public, known as sole corporations or collective corporations.

In forming a corporation, potential shareholders trade money, property, or both, for the corporation’s capital stock. A corporation usually takes the same deductions as a sole proprietorship to figure out its taxable income. A corporation can also take special deductions. For national income tax purposes, a C corporation is renowned as a separate taxpaying entity. A corporation conducts business, realizes net income or loss, pays taxes and allocates profits to shareholders.

2. Types of corporation:

2.1. Close corporation:

A corporation whose shares are detained by a small number of single persons and not publicly traded; particularly: small business corporation in this entry called closely held corporation —compare public corporation to in this entry.

2.2. S corporation:

Specifically S Corporation is a special type of corporation where profits are distributed to stockholders and taxed as personal income.[2] In S Corporation shareholders retain limited liability protection of C Corporation. This form of business may use the cash method of accounting. S Corporation cannot have more than 100 shareholders.

2.3. C Corporation:

C Corporation is the most common form of corporation regulated by statue and treated as a separate legal entity for liability and tax purposes. The typical corporation form is known as C Corporation.[3]

2.4. Shell corporation:

A) A corporation which exists as a legal entity without self-determining assets or operations as a tool by which another firm or corporation can carry out dealings usually not related to its business.

B) A corporation formed for purposes of tax elusion or acquisition rather than for the legitimate business purpose.

2.5. Public corporation:

A) Public corporation is a government-owned corporation involved in a profit-making enterprise that may require the exercise of powers unique to government.

B) Business corporation’s stocks are publicly traded; also called publicly held corporation —compare to close corporation in this entry.

2.6. Municipal corporation:

A political unit created or otherwise given corporate status by a superior governing authority and endowed with powers of local self-government; broadly: a public corporation created to act as an agency of administration and local self-government.[4]

2.7.Small business corporation:

A corporation described in section 1361 of the Internal Revenue Code that has 35 shareholders or less and only one class of stock and that may if eligible elect to be an S corporation and taxed accordingly.

2.8. Professional corporation:

A corporation structured by one or more licensed individuals to provide qualified services and gain tax advantages.

3. Advantages of corporation:

3.1. Corporate tax treatment:

While a corporation is a separate legal entity, it pays taxes separately from its proprietors. [5] Proprietors of a corporation only pay taxes on business profits paid to them in the form of salaries, bonuses, and dividends. The corporation pays taxes, at the corporate rate, on any profits.

3.2. Limited liability:

One of the main reasons for forming a corporation is the limited liability protection provided to its owners. Because a corporation is considered a separate legal entity, the shareholders have limited liability for the corporation’s debts. The private assets of shareholders are not at risk for satisfying corporate debts or liabilities.

3.3. Capital incentive:

The stock formation also allows corporations to draw key and capable employees by offering them an ownership interest in the shape of stock options or stock. In the corporation, new capital can be raised in number of ways .The alternatives are greater than in any of the other legal forms of business. Stock may be sold as either voting or nonvoting .Nonvoting stock will of course protect the power of the existing major stockholders.

3.4. Operational structure:

Corporation’s management is very structured. The owners of a corporation are shareholders, who elect a Board of Directors, which then elects the officers. Shareholders do not take part in the operations of the corporation without the selection of directors. The Board of Directors is the in charge for managing the rights and responsibilities of the corporation. The Board sets corporate policy and the strategy for the corporation, and elects officers — usually a CEO, vice president, treasurer, and secretary — to follow the policies set by the Board, and manage the corporation on a day-to-day basis.

3.5. Transferable shares:

The share of the corporation is freely transferable. The existence of a corporation is not dependent upon the owners or investors. A corporation continues to exist as a separate entity, and is not finished or dissolved even when shareholders die or sell their shares.  The shares of the corporations are freely transferable unless shareholders have “buy-sell” agreements limiting when and to whom shares may be sold or transferred.

4. Disadvantages of corporation:

4.1. Fees:

There are four types of fees: a fee to file the Articles of Incorporation with the Secretary of State, a first-year franchise tax prepayment, fees for various governmental filings, and attorneys’ fees. But every year, tens of thousands of businesses choose to incorporate online without the use of an attorney. For example, basic incorporation before filing fees at a site like costs just $99.

4.2. Formalities:

The proper corporate formalities of organizing and running a corporation must be followed, to receive the benefits of being a corporation. A lot of formalities can be maintained in a corporation which kills some valuable time of the company.

4.3. Paperwork:

Paperwork is a vast element of the corporate formalities that must follow. Reports and tax returns must be compiled and filed in a timely fashion; business bank accounts and records must be maintained and kept separate from personal accounts and assets; records must be kept of corporate actions, including meetings of shareholders and Board of Directors; and licenses must be maintained.

5. Corporation of dissolution:

The corporate of dissolution protects the owners from further damages and gives the owners a opportunity to start as a new company if they desire. There are times when corporation dissolution is caused by severe internal disagreements among corporate leaders. This can be the case when a company changes direction, is being mismanaged, or experiences the breakdown of leadership for various reasons.

In this   process a corporation is eliminated, and the various assets and financial responsibilities of the corporation are handled before it ceases to exist. Dissolution is the last step in liquidation, and an attorney working in this field will usually assist in liquidating the business and ensuring the corporation is properly dissolved.

6. Characteristics of a Global Corporation:

Now a days the international marketplace has become severely competitive and business that want to establish the competition all around the corporate world. Here are some different characteristics of a successful global corporation:

6.1. Innovation:

Global corporations need to be innovative and dynamic so that they can adapt their products and services to fulfill the needs and tastes of many different countries. As a result, their global research and development teams provide a stable flow of ideas that the corporation can use to adapt existing products or services to fulfill new demands.

6.2. Experience:

Global corporations do not established suddenly; most of them start out as a small local firm which runs businesses that gradually grow and expand over time. As the product or service develops through the years, the experience and knowledge gained by the managing staff allows for the implementation of global media and research agencies that can provide the best advice.

6.3. Separate legal entity:

Corporation has a separate legal entity [6]conducts its affairs with the same rights, duties, and responsibilities of a person.[7]

6.4. Limited liability of stockholders:

Liability is one of the most critical reasons for establishing a corporation rather than any other form of business. Amount of capital contribution is limit of share holder’s liability. Stockholders are neither liable for corporate acts nor corporate debt.[8]

6.5. Corporate taxation:

The corporate tax may be lower than the individual rate. The entrepreneur is best advised to consider the tax pros and cons and decide on that basis. Projected earnings may be used to calculate the actual taxes under each form of business in order to identify the one that provide the best tax advantage.

6.6. Large budgets:

All global corporations require extensive marketing budgets so they can effectively set up their brand in different communities. They also require a huge research and development budget so that, the corporation fails to go through a foreign market, they have the finances needed to perform studies to find out where they went wrong and help them to do better in the future.


6.7. Localization:

The more the foreign market is forming the corporation’s home country, the more difficult it is for the corporation to set up a relationship with the loyal customer. However, global corporations must struggle to become as close as possible to all their consumers by setting up communications bridges across countries and cultures. To achieve success in the global marketplace, each product or service offered by the corporation should provide to the needs and requirements of the community in which it is sold.

6.8. Transferable ownership rights:

The corporation has the most freedom in terms of selling one’s interest in the business.

The transfer of the shares from one stockholder to another, generally no effects are following on the corporation or its operations. Shareholders may transfer their shares at any time without consent from the other shareholders.[10]

6.9. Distinct identity:

Global corporations need to have a strong attendance to be familiar worldwide. Developing a exclusive brand image that sends a reliable message is important for international success and, through effective marketing strategy, global corporations often cover local brands to be viewed as the trend setters for a given product or service category.

6.10. Aggressiveness:

To avoid building new stores and training new staff, it is common for global corporations to simply buy competing local businesses as a means of entering a foreign market. The adoption of aggressive point-of-purchase tactics is also a strategy that is frequently employed by global corporations.

7. Conclusion:

Basically the corporation is the most common form of business institute which is chartered by a state and given many legal rights as an entity separate from its owners. This form of business is characterized by the limited liability of its owners, the issuance of shares of easily transferable stock, and existence as a going concern. The process of becoming a corporation call incorporation, gives the company separate legal standing from its owners and protects those owners from being personally liable in the event that the company is sued. Incorporation also provides companies with a more flexible way to manage their ownership structure. In addition, there are different tax implications for corporations, although these can be both advantageous and disadvantageous. In these respects, corporations differ from sole proprietorships and limited partnerships.


1.Robert D.Histrich(2008),Entrepreneurship, Published by MaGraw-Hill,7th edition,page no(265-275)

2.Daniel S.Kleinberger(2005),The closely held business through the Entity-Aggregate prism, wake forest law review

3.Alan L.kinnard(2002),The Limited Liability company versus the S Corporation,Corporate Business Taxation Monthly,PP 10-17

4.Zev Landau(2005),Recent Reform and Simplifications for S Corporations,CPA journal, pp 46-50

5.David j.Denis and Atulya Sarin(2002),Taxes and Relative valuation of  S Corporations and C corporations,Journal of applied finance,pp 5-15

6.Kinnard,The Limited Liability Company versus the S Corporation,pp12-14

7.Robert M.Digiantimmaso(2005),LLC and LLP issues for small privately owned Business,Tax Advisor,pp 24-25

8.the Business Corporations Act (B.C.) [SBC 2002] CHAPTER 57, Part 10

9.RC Clark, Corporate Law (Aspen 1986) 2; See also, Hansmann et al., The Anatomy of Corporate Law (2004) Ch.1, p.2; C. A. Cooke, Corporation, Trust and Company: A Legal History, (1950).

10.Vikramaditya S. Khanna (2005). The Economic History of the Corporate Form in Ancient India. University of Michigan.

11.A Treatise on the Law of Corporations, Stewart Kyd (1793-1794)

12.The Law of Business Organizations

13.Limited Liability Act, 18 & 19 Vict., ch. 133 (1855)(Eng.), cited in Paul G. Mahoney, Contract or Concession? An Essay on the History of Corporate Law, 34 Ga. L. Rev. 873, 892 (2000).

14.Graeme G. Acheson & John D. Turner, The Impact of Limited Liability on Ownership and Control: Irish Banking, 1877-1914, School of Management and Economics, Queen’s University of Belfast, available

15.For a comparison of the differences between the “Classic Corporation” (before 1860) and the “Modern Corporation” (after 1900), see Ted Nace, Gangs of America: The Rise of Corporate Power and the Disabling of Democracy 71 (Berrett-Koehler Publishers, Inc., San Francisco 2003).

16.Hansmann et al., The Anatomy of Corporate Law, pg 7.

17.A leading case in common law is Salomon v. Salomon & Co. [1897] AC 22.

18.Hicks, A. and Goo, S.H. (2008) Cases and Materials on Company Law Oxford University Press

19. Regulatory Competition on Corporate Law

20.Blumberg, Phillip I., The Multinational Challenge to Corporation Law: The Search for a New Corporate Personality, (1993)

21.Bruce Brown, The History of the Corporation (2003)

22.C. A. Cooke, Corporation, Trust and Company: A Legal History,

23.Ernst Freund,, The Legal Nature of the Corporation (1897)

24.Barnet, Richard; Ronald E. Muller (1974). Global Reach: The Power of the Multinational Corporation. New York, NY: Simon & Schuster.

25.Robert Charles Means, Underdevelopment and the Development of Law: Corporations and Corporation Law in Nineteenth-century Colombia, (1980)

26.Grundfest, J.A. (1992). “The limited future of unlimited liability: a capital markets perspective”

27.Orhnial, T (ed.) (1982). Limited Liability and the Corporation. London: Croom Helm

28.Shannon, H.A. (1931). “The coming of general limited liability”. Economic History 2: 267–91.

[1] Robert D.Histrich(2008),Entrepreneurship,7th edition, page no-266

[2] Robert D.Histrich(2008),Entrepreneurship,7th edition, page no-274

[3] Robert D.Histrich(2008),Entrepreneurship,7th edition, page no -265

[4] As a result of its incorporation, a municipal corporation has the capacity to sue and be sued. Citizens as well as officials are usually considered part of a municipal corporation.

[5] At least in the typical C Corporation.

[6] A Separate Legal Entity refers to a type of legal entity with detached accountability.

[7] A separate legal entity means it has some of the same rights in law as a person. It is, for example, able to enter contracts.

[8] A Limited Liability Company (LLC) is a business structure allowed by state statute. LLCs are popular because, similar to a corporation, owners have limited personal liability for the debts and actions of the LLC. Other features of LLCs are more like a partnership, providing management flexibility and the benefit of pass-through taxation.

[9] Graeme G. Acheson & John D. Turner, The Impact of Limited Liability on Ownership and Control: Irish Banking, 1877-1914, School of Management and Economics, Queen’s University of Belfast

[10] David j.Denis and Atulya Sarin(2002),Taxes and Relative valuation of  S Corporations and C corporations,Journal of applied finance,pp 5-15


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