Importance of a Corporation
A corporation is basically a group of people with shares or stocks from a company that make them part-owners of that company. A company may either be a privately held corporation or a publicly held corporation. A privately held corporation is one where the shareholders know each other. They are usually related to each other, some corporations have the whole family as the shareholders. An example of a privately listed company is Cargill Corporation. A publicly listed company is one where shares are sold to anyone who can afford it and who pass up on some tests/ requirements the company has in addition. Shareholders of publicly listed companies do not virtually know each other.
One advantage of a corporation is the limited liability exercised to its owners. When the company was engaged in a lawsuit, the corporation is liable for its settlement fees and not the owners or major stockholders. In the case of sole proprietorship, the owner of the business is considered as the company itself thus he will be held liable should he lost in the lawsuit. He will be the one answerable and might just go to jail. In a corporation, the worst thing that can happen is for the company to close down.
A corporation gives the company huge amounts of initial capital. This is so because more and more people would be buying shares in the hope of gaining annual dividends from the company. With this, it would then be easy for people to invest in the company because of its attractive business packages.
A corporation has the tendency to exist eternally as long as there are shareholders who continue to hold on to their investment at the company. In this reason the company would then boast of stability and strength. Investors are also attracted to the companys excellent business operations made possible because of the corporations huge capitals.
There are many privately-held companies nowadays who switch to making their company publicly-owned for the reasons of: expansion and improvement or sophistication of business models.
Filed under: Uncategorized
Leave a Reply