Law Houses In Dhaka

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

A corporation is a legal entity.[1] There are many different forms of corporations, most of which are used to conduct business.[2] Early corporations were established by charter and many of these chartered companies still exist. Most jurisdictions now allow the creation of a new corporation through registration. Corporations exist strictly as a product of the corporate law.

An important (but not universal) contemporary feature of a 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 natural persons. Corporations can exercise human rights against real individuals and the state, and they can themselves be responsible for human rights violations. Corporations are conceptually immortal but they can “die” when they are “dissolved” either by statutory operation, order of court, or voluntary action on the part of shareholders. Insolvency may result in a form of corporate ‘death’, when creditors force the liquidation and dissolution of the corporation under court order, but it most often results in a restructuring of corporate holdings. Corporations can even be convicted of criminal offenses, such as fraud and manslaughter.

[1] A corporation is a legal entity that is created under the laws of a State designed to establish the entity as a separate legal entity having its own privileges and liabilities distinct from those of its members.

[2] Corporations: Examples & Explanations, Sixth Edition by Alan R. Palmiter (Apr 8, 2009)

Types of Corporation:

There are basically three types of corporations in the business world; C corporation, S corporation and LLC. All businesses have to first become a C corporation before eventually choosing its final metamorphosis. Let us begin the discussion with S Corporation. The S corporation is a corporation that eliminates any chance of having double taxes on the running of the business.

In the S corporation, all its profits are taxed to the shareholders of the business and to the business owners, with no additional federal corporate taxes. One just has to pay an annual tax return through the form 1120S. The income, profits, expenses and losses of the S corporation are all disclosed in this form.

Shareholders of the S corporation are issued separate forms called the Form K-1. In this form, the income that the shareholders received through the corporation and its tax returns are reported. Employees of an S corporation are also taxed with their taxes getting filed with the company.

It is necessary for the S corporation to file their tax returns, with deadlines being met punctually. If the deadline is not met for some reason or the other, the business is offered an extra six months’ time to file taxes. If once again there is another delay, the business is offered the choice of selecting S corporation status for the following year. For a business to elect for S corporation status, its shareholders, both present and prospective have to give consent. Without any consent, the election of S corporation is considered invalid.

On the other hand, LLC is basically the acronym for Limited Liability Company, or Limited Liability Corporation, which has much compensation on tax advantages. While corporations offer attractive limits on personal liability and partnerships offer better tax advantages, the limited liability company works on a combination of these features. In the process, the LLC basically offers protection against any personal liability with a lot of tax advantages. [3]

[3] Pass-through taxation – under the default tax classification, profits taxed at the member level, not at the LLC level (i.e., no double taxation). Limited liability – the owners of the LLC, called “members,” are protected from liability for acts and debts of the LLC.

An LLC is preferred over an S or C corporation not only for these points, but also because they are more flexible than the corporations. In addition to this, all legalities that are connected to the running of the LLC are less formal. This in turn leads to a LLC having a tax advantage.

In terms of federal taxation laws, the LLC exercises flexibility in accessing tax advantages. With more than a partner in the firm, the firm is considered a partnership while multiple owner LLCs are treated as either an S or C corporation. And single owner LLCs are considered either as a sole proprietorship or as a C or S corporation. The main tax advantages of an LLC are owing to the fact that it is able to avoid double taxation and that its dividends are not taxed. In an LLC, its income is forfeited on initial taxation and only each member is taxed on individual allocations. However, some LLCs tend to have franchise taxes on them or may have some annual fees to be paid.

Formation of a corporation:

A corporation is a business or organization formed by a group of people, and it has rights and liabilities separate from those of the individuals involved.

It may be a nonprofit organization engaged in activities for the public good; a municipal corporation, such as a city or town; or a private corporation, which has been organized to make a profit.

In the eyes of the law, a corporation has many of the same rights and responsibilities as a person. It may buy, sell, and own property; enter into leases and contracts; and bring lawsuits. It pays taxes. It can be prosecuted and punished (often with fines) if it violates the law. The chief advantages are that it can exist indefinitely, beyond the lifetime of any one member or founder, and that it offers its owners the protection of limited personal liability.

Limited Liability

If you own shares in a corporation that cannot pay its debts and issued by its creditors, the assets of the company may be seized and sold. But although you can lose your investment, the creditors cannot attach your personal assets (such as cars, houses, or bank accounts) to satisfy their claims.

There are some important exceptions to this rule, however. If the business affairs of a corporation and its shareholders are so entangled that they are, in effect, one and the same, an opponent in a lawsuit may be able to convince a court to “pierce the corporate veil” and impose

Personal liability, or responsibility, on the active shareholders. Personal liability may also be imposed if the corporation does not comply with required legal formalities or fails to keep proper records.

Forming a Corporation

If you want to form a corporation, you must obtain a state charter. Here are some things to do before you apply:

  • Choose the state in which you want to incorporate. This will usually be the state where your company has its headquarters or where it conducts most of its business. Some people prefer to incorporate in states that impose few regulations or no corporate income tax, such as DelawareNevada, and Wyoming.
  • Decide whom you want as officers. Although many states require at least two or three parties to form a corporation, they need not all be shareholders. You may want to ask friends or family members to serve as the initial officers. If you remain the sole shareholder, you alone will control the corporation’s activities

Advantages of a corporation:

  • Limited liability. One of the key 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 personal assets of shareholders are not at risk for satisfying corporate debts or liabilities.
  • Corporate tax treatment. Since a corporation is a separate legal entity, it pays taxes separate and apart from its owners (at least in the typical C Corporation). Owners of a corporation only pay taxes on corporate profits paid to them in the form of salaries, bonuses, and dividends. The corporation pays taxes, at the corporate rate, on any profits.
  • Attractive investment. The built-in stock structure of a corporation makes it attractive to investors.
  • Capital incentive. The stock structure also allows corporations to attract key and talented employees by offering them an ownership interest in the form of stock options or stock.
  • Owner/employee. A business owner who works in his or her own business may become an employee and thus be eligible for reimbursement or deduction of many types of expenses, including health and life insurance.
  • Operational structure. Corporations have a set management structure. The owners of a corporation are shareholders, who elect a Board of Directors, which then elects the officers. Other than the election of directors, shareholders do not participate in the operations of the corporation. The Board of Directors is responsible for managing and exercising 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. In a small corporation, the lines between the shareholders, Board of Directors, and officers tends to blur because the same people may be serving in all capacities.
  • Perpetual existence. A corporation continues to exist until the shareholders decide to dissolve it or merge with another business.
  • Freely transferable shares. Shares of corporations are freely transferable, because as a separate entity, the existence of a corporation is not dependent upon who the owners or investors are at any one time. A corporation continues to exist as a separate entity, and is not terminated or dissolved even when shareholders die or sell their shares. Shares of corporations are freely transferable unless shareholders have “buy-sell” agreements limiting when and to whom shares may be sold or transferred. Also, securities laws may restrict the transferability of shares.

Disadvantages of a corporation:

  • Fees. It costs money to incorporate. 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.
  • Formalities. The proper corporate formalities of organizing and running a corporation must be followed, to receive the benefits of being a corporation.
  • Paperwork. Paperwork is a huge component of the corporate formalities that must followed. 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.
  • Disclosure of names of corporate officers and directors. Most states do not require that names of shareholders be a matter of public record; however, many states require that the names and addresses of corporate officers and directors be listed on one or more documents filed with the Secretary of State.
  • Tax consequences. C corporations have potential double-tax consequences — once when the company makes its profit, and a second time when dividends are paid to shareholders. S corporations can mitigate this tax issue.[4]


The foregoing discussion illustrates the need for greater emphasis on disclosure and corporate accountability, because they are the foundation for public trust in systems of private and public enterprise. Legal considerations and real estate analysis are now more relevant in the execution of corporate strategy and corporate transactions, which require thorough review and understanding of the entity’s capital structure and obligations, within the context of its strategy and business activities.

[4] Deciding to incorporate is based on a variety of different factors. One large factor in deciding whether or not to incorporate is based on the want to reduce personal liability.


1.                                                                             Amihud, Y., Garbade, K. and Kahan, M. (1999), “A new governance structure for corporate bonds”, Stanford Law Review, Vol. 51 No. 3, pp. 447-92.

2.      Unequal Protection: The Rise of Corporate Dominance and the Theft of Human Rights by Thom Hartmann (Apr 24, 2004)

3.      Corporations: Examples & Explanations, Sixth Edition by Alan R. Palmiter (Apr 8, 2009)

4.      The Legal Facts of Life, by Freifeld Wilbur & Taddeo, Frank.

5.      Principles of Banking Law- by Ross Cranston.

6.      Business Law, 6th Ed.

7.      Business law for a new century- by Jeffrey F.Beatty & Susan S. Samuelson, Little, Brown and Company, 1996.





For: The Lawyers & Jurists

M.L.Hotel Tower Ltd,208,Shahid Syed Nazrul Islam Sarani,

Bijoy Nagar, Dhaka-1000.

Country code+ Ph No.

Ph:0088-02-9571389; 0088-02-9513408,

0088-02-9564329, 0088-02-9564398

Direct cell with country code:

Local Code :