Nature of Corporations

Question 1

What is a Corporation?

Answer 1

A legal entity distinct from its owners (shareholders).

Question 2

4 Characteristics of a Corporation

Answer 2

• Perpetual or continuous existence (survives death or replacement of shareholders)
• Centralized management of its assets and business through a board of directors
• Limited liability for shareholders (who are generally shielded from personal liability for the corporation’s debts and obligations)
• Free transferability of ownership interests (shares)

Question 3

Corporate Directors

Answer 3

Sit on the board and are responsible for governing the corporation. The board appoints corporate officers.

Question 4

Corporate Officers

Answer 4

Delegated the responsibility for managing the conduct of the corporate business (agents of the corporation)

Question 5

Shareholders

Answer 5

Owners of the corporation but generally will not exercise control over the management of the corporate business

Question 6

Exam Tip: How to Know if Corporate Law is Being Tested?

Answer 6

If parties in the question are identified as directors, officers, or shareholders.