Explain The Concept Of Corporation According To Economics?


1 Answers

Tariq Habib Profile
Tariq Habib answered
The bulk of economic activity in an advanced market economy takes place in private corporations. Centuries ago, corporate charters were awarded by special acts of the monarch or legislature. The British East India Company was a privileged corporation and as such it practically ruled India for more than a century. In the nineteenth century, railroads often had to spend as much money on getting a charter through the legislature as on preparing their roadbeds. Over the past century, a law has been passed that allow almost anyone the privilege of forming a corporation for almost any purpose.

Today a corporation is a form of business organization, chartered in one of the fifty states or abroad and owned by a number of individual stockholders. The corporation has a separate legal identity, and indeed is a legal person that may on its own behalf buy, sell, borrow money, produce goods and services, and enter into contracts. In addition, the corporation enjoys the right of limited liability, whereby each owner's investment in the corporation is strictly limited to a specified amount.

The ownership of a corporation is determined by the ownership of the company's common stock. If you own 10 percent of a corporation's shares, you have 10 percent of the ownership. Publicly owned corporations are valued on stock exchanges, like the New York stock exchange.

Answer Question