"A corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members.[1] There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter (i.e. by an ad hoc act passed by a parliament or legislature). Most jurisdictions now allow the creation of new corporations through registration.
An important (but not universal) contemporary feature of a corporation is limited liability. If a corporation fails, shareholders may lose their investments, and employees may lose their jobs, but neither will be liable for debts to the corporation's creditors.
Despite not being natural persons, corporations are recognized by the law to have rights and responsibilities like natural persons ("people"). Corporations can exercise human rights against real individuals and the state,[2] and they can themselves be responsible for human rights violations.[3] Corporations are conceptually immortal but they can "die" when they are "dissolved" either by statutory operation, order of court, or voluntary action on the part of shareholders. Insolvency may result in a form of corporate 'death', when creditors force the liquidation and dissolution of the corporation under court order,[4] but it most often results in a restructuring of corporate holdings. Corporations can even be convicted of criminal offenses, such as fraud and manslaughter. However corporations are not living entities in the way that humans are. [5]
Although corporate law varies in different jurisdictions, there are four characteristics of the business corporation"
And equity as:
"In accounting and finance, equity is the residual claim or interest of the most junior class of investors in assets, after all liabilities are paid. If liability exceeds assets, negative equity exists. In an accounting context, Shareholders' equity (or stockholders' equity, shareholders' funds, shareholders' capital or similar terms) represents the remaining interest in assets of a company, spread among individual shareholders of common or preferred stock.
At the start of a business, owners put some funding into the business to finance operations. This creates a liability on the business in the shape of capital as the business is a separate entity from its owners. Businesses can be considered, for accounting purposes, sums of liabilities and assets; this is the accounting equation. After liabilities have been accounted for the positive remainder is deemed the owner's interest in the business.
This definition is helpful in understanding the liquidation process in case of bankruptcy. At first, all the secured creditors are paid against proceeds from assets. Afterward, a series of creditors, ranked in priority sequence, have the next claim/right on the residual proceeds. Ownership equity is the last or residual claim against assets, paid only after all other creditors are paid. In such cases where even creditors could not get enough money to pay their bills, nothing is left over to reimburse owners' equity. Thus owners' equity is reduced to zero. Ownership equity is also known as risk capital or liable capital."
In order to create a Corporation or a Limited Liability Company, one must follow the State laws that dictate how to form one of these entities. The method for setting up either is similar with the only difference being the paperwork that must be submitted for approval. The steps are as follows:
- Determing that the name for your Corporation or LLC is available and in accordance with the laws requiring "Corporation," "Incorporated," or "LLC" to be a part of it.
- File the "Articles of Incorporation" to create a corporate entity or "Articles of Organization" to create and LLC.
- Hold the "Organizational Meeting" and adopt bylaws for a corporation or operating agreements for an LLC.
- Obtain a Federal Employer Identification Number and open a bank account for the company.
- Get a local business license from the city or county where the company will be located.
There are 3 options for dissolving a corporation in Tennessee; voluntarily (described in Tennessee code sections 48-24-101 through 48-24-108), administratively (described in Tennessee code sections 48-24-201 through 48-24-25), and judicially (described in Tennessee code sections 48-24-301 through 48-24-304). For voluntary dissolution all that is necessary is to file the proper paperwork and then proceed to the "winding up" process. The winding up process includes the following steps:
- Collecting corporate assets.
- Disposing of property that will not be distributed to shareholders.
- Paying off or making provisions to pay off corporate liabilities.
- Distributing assets to shareholders.
- Doing any other act necessary to wind up corporate affairs.
The steps for dissolving an LLC in Tennessee are similar to dissolving a corporation, again, only differing in the required paperwork.
The cost of creating a corporation or LLC in Tennessee is minimal and should only be about $200, not including any proprietary licenses necessary to the running of a specifice business (i.e. a tobacco license or an alcohol license ).
The required forms for forming or dissolving a corporation or LLC in Tennessee can be found here:
http://www.tn.gov/sos/bus_svc/forms.htm
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