GBL 295 Lecture 1: What+is+a+Corporation

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General Business-Business Law
GBL 295

What is a Corporation? -Black’s Law Dictionary defines “corporation” as: “An entity (usually a business) having authority under law to act as a single person distinct from the shareholders who own it and having rights to issue stock and exist indefinitely; or A group or succession of persons established in accordance with legal rules into a legal or juristic person that has legal personality distinct from the natural persons who make it up, exists indefinitely apart from them, and has the legal powers that its constitution gives it.” – legal juristic person but not a natural person -Note how many times the word “person” or some variation thereof (“personality,” “legal or juristic person,” “natural person”) occurs in these definitions. -Is a corporation a person? Yes. Legally speaking, a “person” is any entity that has legal rights. In other words, anything that can sue or be sued is a “person” as far as the law is concerned. -Why do we have corporations? Two primary reasons: 1. To shield the natural persons who make up the corporation from legal liability (meaning, in most situations, if a corporation is sued, the person suing the corporation cannot seek to take the assets of the stockholders or the board members or the president, but rather can only access the corporation’s assets). 2. To make money for the shareholders (the corporate directors and officers have a “fiduciary duty” to the shareholders of the corporation, meaning they are obligated to operate the corporation in the shareholders’ best financial interests). -Does a corporation have ethical obligations? There are two schools of thought on this: 1. One, set forth by Milton Friedman
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