Companies Should Know These 4 Elements Of Corporate Law

Corporate law covers a wide range of business activities in America. If you are involved with a company or planning to start one, it's important to understand the basic elements of this branch of law. Understanding these four issues will help you make sense of much of corporate life.

Organization and Governance

Fundamentally, every corporation is a government that has a charter. This government rules whatever domain the company circumscribes. More importantly, the charter determines how the people within the company will run it. This covers everything from the appointment or election of officers to how the business will count profits and losses.

Notably, a corporation's charter is an act of submission to state and federal laws. If a business is organized as a public-held company, for example, its charter will conform to state and federal securities laws.

Bear in mind that organizational concerns follow a company from inception to death, including all the things in between like mergers, spin-offs, and restructuring. If you terminate a company's existence, a corporate lawyer will tell you to file documents with the government formally ending things.

Roles and Duties

A corporation is made up of people who have roles and duties. The charter will outline the roles, and the founders will establish themselves in them. However, from that point forward, the officers of the company, including the founders, have to execute their duties according to the charter and applicable state and federal laws. If the company wants its CFO to be a fiduciary, for example, it must define the role accordingly.


Businesses need to raise capital through financing. Typically, companies finance either through debt or the issuance of equity. Equity refers to shares and bonds.

Even if a company's founders are self-financing, they still will take equity in the business in exchange for their financial contributions. However, the equity doesn't have to be commensurate to the money injected. One founder might provide most of the tech knowledge to build the company's infrastructure, for example, and that person may take a cut of the equity in exchange for their work. A company may also reserve part of its equity to raise further capital or to attract additional employees.


An incorporated business must file at least some reports regarding the state of its finances from time to time. These may be as frequent as quarterly reports for some large publicly-held businesses. Generally, smaller companies will report less often. Also, ones with shares that trade as securities will usually have to publicly file more detailed reports.

Contact a corporate lawyer to learn more.