Importance of a Corporation

A corporation is a group of people with shares or stocks from a company that make them part-owners of that company. A company may either be a privately held corporation or a publicly held corporation. A privately held corporation is one where owners know each other, or are related to each other. An example of this is the Cargill Company which sells animal feeds and stocks. A publicly listed company is one where shares are sold to anyone who can afford it and who pass up on some tests/ requirements the company has in addition. Shareholders of publicly listed companies do not virtually know each other.

One advantage of a corporation is the limited liability exercised to its owners. When the company was engaged in a lawsuit, the corporation is liable for its settlement fees and not the owners or major stockholders. In the case of sole proprietorship, the owner of the business is considered as the company itself thus he will be held liable should he lost in the lawsuit. He will be the one answerable and might just go to jail. In a corporation, the worst thing that can happen is for the company to close down.

A corporation gathers a lot of shares from individuals that make it possible for them to invest in sophisticated equipments and manpower in order to create a smooth flowing business operation. With this, it would then be easy for people to invest in the company because of its attractive business packages.

Corporations are known to exist eternally as long as there are shareholders that possess their stocks. This lies in the value that the company is strong and stable. Investors are also attracted to the companys excellent business operations made possible because of the corporations huge capitals. A corporation has a good operations systems and working environment because of the huge capital invested on equipments and manpower which makes it attractive for future investors.

There are many privately-held companies nowadays who switch to making their company publicly-owned for the reasons of: expansion and improvement or sophistication of business models.

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