corporation, in law, organization enjoying legal personality for the purpose of carrying on certain activities. Most corporations are businesses for profit; they are usually organized by three or more subscribers who raise capital for the corporate activities by selling shares of stock stock, in finance, instrument certifying to shares in the ownership of a corporation. Bonds are similar evidences of shares in a loan to a corporation. Stock yields no dividends until claims of bondholders have been met.
..... Click the link for more information. , which represent ownership and are transferable. Besides business corporations, there are also charitable, cooperative, municipal, and religious corporations, all with distinctive features. In the United States all governmental units smaller than a state (e.g., counties, cities) are municipal corporations. Certain religious functionaries (e.g., Roman Catholic archbishops) legally are corporations sole.

The legal personality of a corporation is symbolized by its seal and its distinctive name. As a legal person, the corporation continues in existence when the organizers lose their connection with it. In most cases its liability is limited to the assets it possesses and creditors may not seize property of persons associated with the corporation as stockholders or otherwise. Legal personality gives the corporation many of the capacities of a natural person; e.g., it can hold property and can even commit crimes (for which it may be fined and its directors imprisoned).

The Modern Corporation

The modern concept of corporate power holds that the rights of the participants as well as the conduct of the enterprise must be the subject of managerial discretion. The salient characteristic of the modern corporation is the separation of management from ownership. Management of industrial corporations now requires executive managers and a corporate bureacracy to oversee its complex and interlacing activities.

The large business corporation has strongly influenced the control of property in the modern world. The large corporations are typically controlled by a small minority of the stockholders. There are several methods employed by small groups of stockholders to gain control of large corporations. These include pooling of the majority of stock in the hands of trustees having the power to vote it and the use of proxies (agents for the actual stockholders pledged to vote for particular candidates for managerial positions). Proxies are generally successfully used because stockholders rarely attend meetings or name proxies other than those suggested to them by management.

A more recent type of corporation is the holding company, organized to buy a controlling interest in other corporations; this type of corporation typically possesses no physical assets. The amount of cash needed to control a concern is lessened by pyramiding holding companies. This is done by creating a company to hold a voting control of one or more operating companies. A third company is created to hold a controlling interest in the second, and so on. The control of the last holding company is sufficient to control all; and such control, because of the scattering of stock among many small holders, may need the ownership of only 10% or 20% of the stock available.

See also trust trust, in law, arrangement whereby property legally owned by one person is administered for the benefit of another. Three parties are ordinarily needed for the relation to arise: the settlor, who bequeaths or deeds the property for another's benefit; the trustee, in
..... Click the link for more information. .

The Regulation of Corporations

Until 1844 incorporation in England continued to be a matter of special grant by the king or Parliament. New corporations were created in the Industrial Revolution to finance larger economic units, such as railways and steam-driven machinery in factories. In the United States the state legislatures became the chief authorities to grant charters to corporations, although the federal government incorporates in a limited field. Federal charters were granted to both of the Banks of the United States, to certain railroads after the Civil War, and to the Communications Satellite Corporation (Comsat). Corporations owned by the federal government and financed by government appropriations include the Federal Deposit Insurance Corporation, the Community Credit Corporation, and various corporations established to meet emergencies and later liquidated. At first states passed a special act for each incorporation, but in 1811, New York state enacted a general incorporation law enabling the secretary of state to give charters. Since the Dartmouth College Case Dartmouth College Case, decided by the U.S. Supreme Court in 1819. The legislature of New Hampshire, in 1816, without the consent of the college trustees, amended the charter of 1769 to make Dartmouth College public. The trustees brought suit.
..... Click the link for more information. of 1819, when a charter was held to be a binding contract between a state and a corporation, unalterable and unamendable by the state without the corporation's consent, fewer perpetual charters have been granted, the right of the legislature to alter or annul being specifically reserved in the charter. Variability in state incorporation laws and the ability of corporations incorporated in one state to do business in all other states have allowed corporations to incorporate in the state or states having the most lenient incorporation laws. In general, the history of corporations in the United States has been marked by the abdication of state control over corporations.

Bibliography

See R. Sobel, The Age of Giant Corporations (1984); J. Davis, Corporations (1905, repr. 1986); W. Doran, The Business Corporation in the Democratic Society (1987); J. Bakan, The Corporation: The Pathological Pursuit of Profit and Power (2004).

corporation

Specific legal form of organization of persons and material resources, chartered by the state, for the purpose of conducting business. As contrasted with the other two major forms of business ownership, the sole proprietorship and the partnership, the corporation has several characteristics that make it a more flexible instrument for large-scale economic activity. Chief among these are limited liability, transferability of shares (rights in the enterprise may be transferred readily from one investor to another without constituting legal reorganization), juridical personality (the corporation itself as a fictive “person” has legal standing and may thus sue and be sued, make contracts, and hold property), and indefinite duration (the life of the corporation may extend beyond the participation of any of its founders). Its owners are the shareholders, who purchase with their investment a share in the proceeds of the enterprise and who are nominally entitled to a measure of control over its financial management. Direct shareholder control became increasingly impossible in the 20th century, however, as the largest corporations came to have tens of thousands of shareholders. The practice of proxy voting by management was legalized and adopted as a remedy, and today salaried managers exercise strong control over the corporation and its assets. See also multinational corporation.