Introduction
Companies are governed by state and federal laws, but they must also comply with their own internal regulations. This can lead to some confusion for an outsider trying to figure out how a company operates. For example, if you get a call from your friend saying that he wants to start his own business and needs some advice on how corporate law works, what would you say? Say’s Jeremy Schulman, do you know the difference between a sole proprietorship and a corporation? Are corporations required to pay taxes on their profits? Do all corporations have boards of directors? Is there anything else I should know about how this whole thing works?
The corporation, a creation of government and the law, is an entity separate from its shareholders.
- The corporation, a creation of government and the law, is an entity separate from its shareholders.
- A corporation has its own legal existence apart from any individual shareholders or directors or officers.
- This means that when you sue a corporation in court for damages suffered as a result of defective product manufacture or sale, you can only recover money for yourself if you can show that there was negligence on the part of someone who worked for that particular company (and not just any employee).
The board of directors is the governing body of a corporation. Its members are elected by shareholders and it’s their job to manage the company’s business affairs.
The board of directors is the governing body of a corporation. Its members are elected by shareholders and it’s their job to manage the company’s business affairs.
The board of directors has three main functions:
- They appoint and oversee senior management, including CEOs and other officers.
- They set strategy for the organization, including its long-term goals and objectives.
- They are responsible for ensuring that all company operations comply with applicable laws and regulations
Shareholders are part owners of a company, but they usually don’t have any say in how it’s run. Instead, that responsibility falls to the directors and officers who manage the day-to-day operations.
Shareholders are part owners of a company, but they usually don’t have any say in how it’s run. Instead, that responsibility falls to the directors and officers who manage the day-to-day operations.
Shareholders elect a board of directors to oversee their interests as shareholders and make decisions on behalf of them (e.g., setting executive compensation). Directors have fiduciary duties — legal obligations — to act in the best interest of all shareholders equally. They may also serve on committees (such as finance or audit) that make recommendations about specific issues affecting the company’s success or failure
Every year companies must file several different reports with different government agencies including tax returns, annual reports and registration documents depending on what state they’re incorporated in.
Every year companies must file several different reports with different government agencies including tax returns, annual reports and registration documents depending on what state they’re incorporated in. The most important of these are:
- Tax Returns – All businesses have to file a federal income tax return every year. This form is submitted to the Internal Revenue Service (IRS) by April 15th of the next calendar year after your fiscal year ended (if you had a fiscal year-end of December 31st then you would submit your tax return by April 15th). You also need to pay any taxes due as part of this process so make sure there is enough cash on hand before doing this!
- Annual Reports – Every publicly-traded company must issue an annual report each year within 60 days after its fiscal year ends (so if yours ended December 31st then it needs be issued between January 1st-March 15th). These reports contain information about your finances including revenues/profits from operations as well as other relevant metrics such as number employees etc..
Conclusion
We hope this guide has helped you understand the basics of corporate law and how it affects your company. If you have any questions, feel free to reach out to us at [email protected] We’re happy to help!
