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Nature of a Corporation

Corporation is a legal entity that has an independent existence, separate and distinct from its members. The corporation owns property in its own name, acquires rights, obligations and liabilities, enters into contracts and agreements and has the capacity to sue and be sued as would a natural person.

For example, a corporation may be insolvent while its individual members may be wealthy. As a separate legal entity a corporation is not affected by changes in its membership and its existence continues in perpetuity unless its members or the Government take steps to dissolve it.

A corporation is managed or governed by a board of directors which is elected by the members. Usually the board of directors, in turn, either elects or appoints officers such as secretary, treasurer, president. These officers are responsible for the actual operation of the corporation.

Neither the directors, officers nor members "own" the corporation nor do they have any right of ownership to any particular asset of the corporation and the corporation may not be operated for the financial gain of its members, directors or officers.

In certain circumstance, a not-for-profit corporation may engage in activities that are revenue producing and that produce a "profit". Such activities must be incidental to the principal objects of the corporation and in furtherance of the principal objects. For example, a boys’ hockey club may hold a dance to raise funds for new uniforms for the team. If, after paying the expenses, the dance produces a "profit", the monies belong to the club and are to be used for the benefit of the club i.e. to purchase new uniforms for its team.


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