What is a corporation and how is it structured?
A corporation is formed through a process called incorporation, which involves registering the business with the appropriate government authority. Once established, a corporation operates as an independent entity, with its own rights, responsibilities, and obligations. Corporations possess many of the same rights as individuals, such as entering contracts, owning assets, and engaging in legal proceedings. Some benefits of corporations include limited personal liability for shareholders, simple transfer of ownership, business continuity, better access to capital (depending on the corporation structure), and tax benefits.
A corporation has a well-defined structure that helps it function efficiently. Shareholders are the owners of the corporation. They invest capital in the company by purchasing shares and, in return, receive ownership rights and dividends. The board of directors is elected by the shareholders and serves as the governing body of the corporation. They provide strategic direction, oversee management, and ensure that the corporation acts in the best interests of its shareholders. The officers, and other executives, are responsible for the day-to-day operations of the corporation. The Chief Executive Officer (CEO) is the highest-ranking executive in a company with responsibilities including making corporate decisions, managing operations and resources of the company, and acting as the main point of communication between the board of directors and operations. The Chief Financial Officers (CFO) organize financial activities including being responsible for the finance and accounting professionals and serve as advisors for the CEO. They ensure that a company’s revenue goals are met, and cash flow is stable. The Chief Operating Officers (COO) report to the CEO and their work primarily focuses on helping the company develop strategies to meet objectives, perform marketing, and human resources tasks.