A corporation is an independent legal entity that can conduct business on its own behalf. This means that companies can own property, enter into binding contracts, borrow money, sue and be sued, and pay taxes. The five main characteristics of a public limited company are limited liability, shareholder ownership, double taxation, continuity of useful life and, in most cases, professional management.Shareholders are only agents of the corporation if they are also employees or are designated as agents. A company pays its investors by issuing them dividends, which is different from distributions that are made by a company or a sole proprietorship to pay their owners.
A corporation pays income taxes on its profits. If dividends are also paid to investors, they must pay income tax on the dividends received. This is known as double taxation of the corporate entity's profits. The ownership of a corporation is based on the number of shares it owns. Buying or selling these shares transfers ownership of a corporation to another investor.
A public company that lists its shares on an active stock exchange can have thousands or millions of owners. Since a company is its own legal entity, it can initiate litigation on its own, protecting its owners from personal liability in the event that legal action is initiated. This is one of the main advantages of forming a corporation. In summary, the key legal characteristics of a corporation include limited liability, shareholder ownership, double taxation, continuity of useful life and professional management. These features provide protection for shareholders and allow corporations to operate independently.
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