The concept of a corporate personality traces its roots to ROMAN LAW and found its way to the American colonies through the British. After gaining independence, the states, not the federal government, assumed authority over corporations.
Although corporations initially served only limited purposes, the Industrial Revolution spurred their development. The corporation became the ideal way to run a large enterprise, combining centralized control and direction with moderate investments by a potentially unlimited number of people.
The corporation today remains the most common form of business organization because, theoretically, a corporation can exist forever and because a corporation, not its owners or investors, is liable for its contracts. But these benefits do not come free. A corporation must follow many formalities, is subject to publicity, and is governed by state and federal regulations.
Many states have drafted their statutes governing corporations based upon the Model Business Corporation Act. This document, prepared by the American Bar Association Section of Business Law, Committee on Corporate Laws, and approved by the AMERICAN LAW INSTITUTE, provides a framework for all aspects of corporate governance as well as other aspects of corporations. Like other MODEL ACTS, the Model Business Corporation Act is not necessarily designed to be adopted wholesale by the various states, but rather is designed to provide guidance to states when they adopt their own acts.
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