Who Owns the Corporation?
When your business decides to incorporate you will be able to define the “shareholders of a corporation” or owners of the company. A shareholder may also be known as a stockholder because they own a share or have stock in a company. In most cases, shareholders of a corporation are the initial founders who have placed their own personal assets into the establishment of the company.
Determining Shareholders of a Corporation
Typically, the shareholders of a corporation are limited to those who have invested their own efforts into the formation and growth of the company. For example, if 3 friends start a car washing business together and each invests $20,000 in the initial startup capital, they would all likely be considered shareholders in the corporation.
Shareholders of a corporation do not always have to be monetarily invested in the company to maintain partial ownership. In the example of a family business where a child is intended to inherit the business from their parents, the child may be given a small percentage of ownership as a shareholder of a corporation. This will make it easier in the future for the parents to retire their involvement in the business and allow the child to take over as the main shareholder or owner.
Are shareholders of a corporation liable for its failure?
No. Part of the reasons a business may decide to incorporate itself is to protect the shareholders of a corporation from any financial or legal liability the business’ failure may bring. Where a self-owned business would leave the owner open to legal action should the business be involved in litigation, a corporation protects the owners from becoming personally liable in a lawsuit against the business.
If you are considering become an owner of a business, you should seek incorporation as a means of protecting your own personal assets. If a corporation is sued, the shareholders of a corporation can only lose the initial investments they have personally paid into the company. The lawsuit cannot seek any further personal assets that the shareholder did not allocate to the growth of the business.
Hiring California Business Law Attorneys
When deciding to incorporate a business, no matter if it is newly formed or established and looking for additional protection, you should be aware of who is considered shareholders of a corporation. Remember that they hold ownership over the company, and can therefore have a say in the decisions regarding its formation and operation.
The California business law attorneys at the ADLI Law Group P.C. have formed lasting relationships with businesses across Los Angeles County and around the globe. Contact ustoday for experienced help with incorporating your business – 800-817-2949.