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What is a Corporation?
A corporation is a legal entity which is separate from its owner. A corporation is a separate legal entity under the law, as if it were a person. A corporation can loan or borrow money like an individual, enter into contracts, sue others or be sued, hire or fire employees, own assets, have liabilities and pay taxes.
What is the difference between Corporate Law and Business Law?
Business Law is a broader term than Commercial Law. Business law refers to the general, wider concept of commercial law. An entity can do business as a corporation, but also as a partnership or sole proprietorship. A corporation confers its owners and shareholders with its most distinctive benefit: limited liability. It is a separate legal entity, with perpetual existence and can be transferred.
The corporate design is frequently picked for huge business activities that carry on a business for financial benefit. Among the main purposes behind deciding to become a corporation is the advantages of restricted risk, also known as limited liability.
What is limited liability? If an organization becomes insolvent, the shareholders (investors), are not at risk for the obligations or different commitments brought about by the company. Indeed, the investors will lose their venture, yet they won’t be responsible for its financial obligations.
Separate Legal Entity
A corporation is perceived under corporate law in Canada as a separate legal entity. It works independently from its shareholders, officers and directors. As shown before, a company (like an individual) can purchase or sell property, sign agreements, sue others and be sued, and be responsible for a criminal offense (corporations typically pay fines in lieu of incarceration). A corporation exists as its own element, paying little attention to what happens to the people associated with the business.
Perpetual existence alludes to a partnership’s proceeded with presence until it is sold to another company, liquidated, or dissolved. All the more generally, an organization acts in perpetual existence, which means it will keep on existing, until those in charge choose to end it. This offers strength and security to would-be financial backers. It doesn’t matter if employees leave, a corporation can hire new employees to take their place.
Free adaptability means investors have the capacity to sell shares without the consent of the directors, other shareholders or officers, unless the corporation constitution restricts otherwise.
Provincial Incorporation or Federal Incorporation
In Canada, private corporations can be incorporated provincially or federally. Each province has their own laws and legislation which governs corporations. For example, Ontario corporations are governed by the Business Corporations Act (Ontario) while federally incorporated corporations are governed by the Canada Business Corporations Act.
In public companies, shares are bought, sold or transferred on a stock exchange, such as the Toronto Stock Exchange (TSX). This provides liquidity to its shareholders.
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