There are different forms of businesses and they al have their own purpose. Some are for individuals and others are for partners but they both have different forms. Depending on the size and type of business the owners decide how they are going to start it. Also the liability behind them and the type of ownership also depends on how they decide to go.
A corporation is a juridical entity established under the corporation code and register with the Securities and Exchange Commission. It has to have a minimum of five persons and up to fifteen. The liability is limited for the shareholders and are only countable for the amount of capital invested. It is more difficult to create, manage and organize. Depending on how many shares an individual has that’s how the participation of them is assign. If an individual has not that many shares they will be left out with out any participation or word in the company actions and next moves. An example would be Apple and Microsoft.
Individuals ask, “What are the benefits to commerce of having shareholders and other entities that shield their members, protected from personal liability?” There are many benefits to having shareholders, one of the main reasons why individuals decide to incorporate is the personal liability protection it has on its members. The law protects the shareholder’s personal property and the shareholder is only responsible for the value of the equity they have in the company.
It also has tax advantages, some incorporated business are able to lower their tax rate by reducing the salaries paid to their owners. The CEOs of these companies are able to carry out their management skills with the support of the shareholders. The ability to transfer ownership is a great benefit because in case of a death or simply selling their shares can be done without having to finish the organization and starting a new one with new owners.
Another question frequently asked is “Would commerce be better served if personal liability would attach to those individuals for the misdeeds of their entity?” There are individuals that would say yes, have their personal belongings attached to the corporation. The logic behind an insurance company is to protect individuals from mistakes, either caused by others or individual mistakes. Having a corporation gives the opportunity to a group of individuals to carry out a business idea and to have the ability to prosper or to fail without loosing all their life savings and personal belongings. Individuals make mistakes and it is not fair to loose everything on the first try.