Who Legally Owns a Corporation?

By Laura Payet

Who Legally Owns a Corporation?

By Laura Payet

The person(s) who legally own a corporation will depend on the laws of the state where the company incorporates. But because this type of business structure is a legally separate entity from its owners and capable of acting in its own name, the concept of corporate ownership is thornier than this simple answer suggests.

Coworkers working around a table

In general, a corporation's owners are its shareholders, but shareholders do not enjoy all the rights we typically associate with the idea of ownership. For this reason, some commentators have suggested that no one truly owns a corporation.

Forming a Corporation

To form this type of entity, you must file articles of incorporation with the designated state agency, usually the Secretary of State's office. The articles generally include the following information:

  • Company name and principle address
  • Registered agent's name and address
  • Business purpose, powers, and planned duration
  • Number and type of stock shares authorized for issue, and their value
  • Identities of the initial board of directors and officers

The initial shareholders are issued shares in exchange for their capital contribution. Once created, the corporation has a separate legal existence from its shareholders. This legal separation protects shareholders from personal liability for any business debts. It also means that the company can, on its own behalf, enter into and enforce contracts, buy and sell property and assets, and make political contributions.

Corporate Ownership

Corporate ownership is vested in shares of stock. The percentage of outstanding shares of stock that an individual shareholder owns determines their percentage of ownership. One person who owns more than 51 percent of the outstanding shares is known as a controlling shareholder.

For a large, publicly traded company with thousands of shareholders, each one's ownership percentage is significantly diluted. But with a closely-held, privately-traded business, a few people may have substantial ownership.

Shareholders' Rights

A corporation may issue multiple classes of stock, each conveying different rights. But, contrary to common conceptions of business ownership, shareholders of any class of stock typically do not have the right to run it or access corporate assets. Common shareholder rights encompass the right to:

  • Elect and remove directors
  • Receive dividends (if the board declares any)
  • Sell current shares or purchase additional shares of stock
  • Inspect corporate records
  • Sue for the directors' wrongful acts, such as breach of fiduciary duty
  • Receive a proportional share of any assets left over after liquidation

The officers as well as the board of directors actually manage the company and run the business. The board sets policy and makes broad decisions, while the officers are in charge of day-to-day operations. Both the officers and directors owe a fiduciary duty to the shareholders, to conduct corporate operations for their benefit.

If you are ready to launch your business, the corporate format may be right for you. In addition to protecting you from personal liability for the debts, a corporation allows you to raise capital more easily from outside investors. Before doing so, review your state's requirements to ensure proper formation.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.