Corporation is a business structure which is made by a group of people to make a business venture. The overall management structure of a corporation is totally different from other business entities.

Why were corporations formed?

1. To protect constructed railroads
2. To make greater money for tribes
3. To protect individual investments
4. To make the government money

Anwer of “Why were corporations formed?” is 3. To protect individual investments.

Companies are formed to protect individual investments.

How does a corporation help to protect individual investments?

The main advantage of incorporating is your personal assets are not used if a court judgement are entered against your corporation. For example, if the court decides you need to pay the debt of $20000 to the creditors, you don’t need to pay it from your individual assets. Whatever loss you’re in, you’ll only lose the money you’ve invested in the corporation.

Benefits of a corporation

Here are some of the benefits of forming a corporation:

• Tax advantages

• Company can buy and sell property

• Limited liability

• Employees are not required to file income tax returns

• Company can sue and be sued

• Tax deductions

• Shareholders have voting rights

• There are no shareholders

• No need to register a company

• The company can have a board of directors

• Directors are chosen by the shareholders

• Directors cannot be removed except for cause

• Directors are not liable for company debts

• Directors are liable for their own personal assets

• Company can borrow money from banks

• Bankers have limited liability

• Company can pay dividends to shareholders

• Companies are eligible for bankruptcy

• If a shareholder dies, the company will be dissolved

• If a shareholder dies, the shareholders’ estate will receive the balance of the company

• Corporations are considered as separate legal persons

• Shareholders are not liable for the company’s debts

• There is no such thing as a corporation’s death

• Companies can own and control land

• Companies are not taxed on income from real estate

• Companies can sue and be sued

• Companies can employ lawyers and accountants

• Companies can enter into contracts

• Companies can make contracts with third parties

• Companies can buy and sell goods and services

• Companies can issue debt and equity securities

• Companies can own other corporations

• Companies can be liquidated

• Companies can pay dividends

• Companies can merge or consolidate

• Companies can hold bank accounts

Also Read:What Are The Objectives Of Business?

FAQ on Why were corporations formed?

1. FAQ: What is the primary reason for the formation of corporations?

   • Answer: The primary reason for forming corporations is to create a separate legal entity distinct from its owners. This separation allows for limited liability, meaning owners are not personally liable for corporate debts and liabilities. It also facilitates easier access to capital and more efficient management.

2. FAQ: How do corporations facilitate easier access to capital?

   • Answer: Corporations can raise capital more easily than individual proprietors or partnerships by issuing stocks or bonds. This ability to sell shares allows corporations to pool financial resources from a large number of investors, facilitating significant capital accumulation for large-scale projects or expansions.

3. FAQ: Were corporations formed to limit the liability of business owners?

   • Answer: Yes, one of the key reasons for the formation of corporations is to limit the personal liability of its owners. In a corporation, shareholders’ liability is typically limited to the amount they invested in the company, protecting their personal assets from the company’s debts and legal responsibilities.

4. FAQ: Did the need for large-scale infrastructure projects contribute to the formation of corporations?

   • Answer: Absolutely. The development of large-scale projects, like railroads, highways, and later, technological and industrial advancements, necessitated substantial capital investments that individual entrepreneurs or small partnerships could not easily manage. Corporations, with their ability to gather large amounts of capital, were instrumental in these developments.

5. FAQ: Are there tax benefits associated with forming a corporation?

   • Answer: Yes, corporations can offer certain tax benefits. While corporate profits are taxed, corporations can also take advantage of various deductions, credits, and preferential tax rates not available to individuals, which can sometimes lead to tax efficiencies.

6. FAQ: Was the establishment of corporations influenced by the need for perpetual succession?

   • Answer: Yes, one of the advantages of a corporation is its perpetual succession. Unlike sole proprietorships or partnerships, corporations continue to exist even if ownership or management changes, which allows for uninterrupted operation and long-term planning.

7. FAQ: Did the desire for more structured management lead to the formation of corporations?

   • Answer: Yes, corporations allow for a more structured and potentially more efficient management system. With a board of directors, executive management, and clear hierarchies, corporations can handle complex operations and decision-making processes more effectively than other business forms.

8. FAQ: How did the need for economic growth and industrialization influence the formation of corporations?

   • Answer: The industrial revolution and the subsequent need for economic growth significantly drove the formation of corporations. They provided a means for amassing the capital and organizing the labor and resources necessary to build, operate, and expand industrial enterprises on a large scale.

9. FAQ: Do corporations contribute to job creation and economic stability?

   • Answer: Yes, corporations play a significant role in job creation and economic stability. By pooling resources and organizing large-scale business operations, they can provide stable employment opportunities and contribute to economic growth and development.

10. FAQ: Were corporations formed to facilitate international trade and expansion?

    • Answer: Yes, the corporate structure facilitates international trade and expansion. Corporations, with their ability to accumulate substantial resources and manage complex operations, are well-suited to navigate the challenges of operating across different countries and markets.