Who Legally Owns a Corporation?

by Louis Kroeck Google
Many parties have interests in corporations.

Many parties have interests in corporations.

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There are different schools of thought as to who legally owns a corporation. Many people argue, as the late economist Milton Friedman believed, that the shareholders of a corporation are the owners, because they have an expressed stake in the corporation, voting rights and other ownership-like rights. Others, such as UCLA law professor Stephen Bainbridge, claim that shareholders are not the true owners of a corporation and that a corporation is not capable of being owned; they argue that a corporation is a distinct and separate entity. This concept is known as "corporate personhood."

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Shareholders

A shareholder, also called a stockholder, is an individual who owns shares in a corporation. Sale of stock in a corporation may be public or private, so some corporations will have thousands of shareholders while others may have just a few. In addition to public or private corporations, some corporations also have different classes of stock, meaning that some shareholders within a corporation may have different rights than other shareholders.

Rights of Shareholders

Most shareholders have the following rights with regard to a corporation: the right to sell their stock in the corporation, the right to elect and remove the corporation's directors, the right to any dividends, the right to purchase additional stock should the corporation make an offering and the right to any share of assets left over after the liquidation of the corporation.

Ownership

Although shareholders have many rights that are similar to ownership, they do not legally "own" a corporation, and they do not have the same rights as a true owner would. Shareholders are not free to use corporation assets as they see fit, as a true owner could. Although shareholders may have the ability to appoint and remove directors depending on the structure of the corporation, this power still does not grant actual managerial rights or rights to posses or otherwise use the assets of the corporation.

Corporate Personhood

Corporations are comprised of many different groups of people, including employees, directors, shareholders and executives. Despite the varying parties with different interests in the corporation, corporations are viewed as their own distinct entity. Corporations have some rights similar to those of people, including the right to make political contributions, the right to enforce contracts, and the right to buy and sell property. Because corporations have so many distinct rights it could be argued that they aren't legally owned by any individual: They comprise many individuals operating under a common agreement.