Corporations and the Stock Market
So you’ve got a business, and it is doing well. The chances are that you took out a loan to cover the startup costs. Now you’ve paid that loan off with interest, and you are ready to start expanding. Your hard work, determination, and good fortune are paying off. Now, you want to sell shares in your business on the stock exchange. You want to “Go Public” as they say. Well, what you’ve got now is a sole proprietorship and is not allowed to be sold on the public market. You need to turn your business into a corporation first.
Here’s something weird about the law. Your sole proprietorship will go through a legal process to turn it into a corporation. You’ve given birth to another U.S. citizen once the corporatization process has run its course. Yes, your business, the one you started in your garage those years ago, is now a person. It is so much a person that the Supreme Court ruled in favor of corporate free speech. In essence, a corporation is a person, so it has the same rights as you and me, meaning its granted the right to unabridged free speech.
Now that your corporation is a person, it gets certain rights, including free speech. It receives a social security number which, for corporations, is referred to as a tax I.D. number. Now this corporation can own property, sue people, and make contracts. The beauty of it now is that if your company ever gets sued, you are not on the hook. The person that is the corporation is on the hook. Now that your corporation is a real, registered American, can be traded on the stock exchange. Corporations are not like you and me because they governed under a whole separate slew of federal laws.
These laws govern how the corporation is structured. The rules are in place to protect the entire entity and the whole stock market. One of the regulations states that each corporation needs a board of directors. Each year they meet to vote who will sit on the board.
The board of directors makes decisions for the company. The board hires the officers that run the company, including the president, CEO, and COO. The committee makes the company’s decisions and sets the company’s policies. The election of the board is a crucial time for any corporation. This board of directors is the corporation’s brain. The brain tells this giant company what to do. The corporation limits the liability of the stockholders. If the corporation gets sued than the stockholders will lose their share but won’t get sued otherwise. They won’t “lose their shirt” so to speak.