Who Legally Owns a Corporation?

By Louis Kroeck

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."


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.

Ready to incorporate your business? Get Started Now


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.

Ready to incorporate your business? Get Started Now
The Right to Sue a Board Director



Related articles

Can an S-Corp Own an LLC?

An S corp may own up to 100 percent of an LLC, or limited liability company. While all but single-member LLCs cannot be shareholders in S corporations, the reverse -- an S corporation owning an LLC -- is legal. The similarity of tax treatment for S corps and LLCs eliminates most of the common concerns about IRS issues. Both structures "pass through" profits and losses to their owners for personal income tax submission.

How Can a Person That Owns a Corporation Get Sued for Fraud?

One of the biggest advantages of a corporation is that this business structure protects controlling shareholders from personal liability for the debts and liabilities of the business. This protection does not mean that persons involved with the corporation can undertake fraudulent activities and enjoy immunity under corporate liability protection. Officers, directors and controlling shareholders of the corporation owe the other shareholders a fiduciary duty. Under the legal theory of “piercing the veil,” a controlling shareholder can be held personally responsible for fraudulent actions by the corporation initiated by that individual.

Can an Owner Be Voted Out of an S Corporation?

S corporations are corporations that have made a special election with the Internal Revenue Service to be taxed only at the individual shareholder level rather than at both the corporate and individual levels. Owners of the company, known as shareholders, do not participate directly in business operations and may not be voted out. If a shareholder takes on an additional function as a director or officer, he may be removed from that position. However, this removal does not affect the shareholder's ownership in the company.

LLCs, Corporations, Patents, Attorney Help Incorporation

Related articles

Can a Corporation Be a Partner in a Partnership?

Corporations share many abilities possessed by individuals, including the ability to enter into a partnership. ...

The Disadvantages of Corporate Governance

Corporate governance is one of the law's most intensely regulated fields. This is because corporations are privately ...

Can I Have Many Businesses Under My Corporation?

A corporation is an independent legal entity that is formed under state law. It has an existence that is separate from ...

Does a Corporation Really Need a Board of Directors?

A corporation's structure is more complex than a sole proprietorship or partnership, but it offers protection to its ...

Browse by category
Ready to Begin? GET STARTED