Corporate and securities law
The article outlines some of the basics of United States corporate and securities law that is necessary to consider when planning a business in the United States. The United States has the world’s largest economy and is filled with incredible business opportunities.
The United States has laws at the federal, and state levels. All 50 states have their own state and local laws. However, U.S. federal law creates a minimum standard for trade in company shares and governance rights. These standards are mainly established in the Securities Act of 1933 and the Securities and Exchange Act of 1934. An interesting aspect of the U.S. corporate law is that the U.S. Constitution allows corporations to be incorporated in the state of their choice, regardless of their principal place of business. In this aspect, most U.S. corporations are incorporated in Delaware, due to their favorable corporate laws and taxes. The process of creating and organizing a corporation is done according to state laws. These laws are different from state to state. For instance, there are certain states that demand a corporation to have a meeting with its shareholders at least once per year and others require a lawyer to be present at these meetings. There are many forms of entities in the United States such as sole proprietorship, partnerships, limited liability companies, and corporations.
In the United States, corporations can choose between filing taxes as a C corporation or as an S corporation. The latter is considered a “pass-through entity” and this means the business itself is not taxed. Instead, the taxes are being deducted from the revenue that the owners declare. C corporations are separate taxable entities and they file a tax return and pay taxes on their own.
On the other hand, securities law and regulation in the United States is the field of law that covers transactions. Securities laws are the laws and regulations governing financial instruments such as stocks, mutual funds, and bonds. The term is usually understood to include both federal and state level regulation. At the federal level, the primary securities regulator is the Securities and Exchange Commission (SEC). Futures and some aspects of derivatives are regulated by the Commodity Futures Trading Commission (CFTC). The SEC’s primary function is to oversee organizations and individuals in the securities markets, including securities exchange, brokerage firms, dealers, investment advisors and investment funds. Through established rules and regulations, SEC promotes disclosure and protects corporations against fraud. It provides investors with access to registration statements, periodic financial reports, and other securities forms through its electronic data-gathering database – EDGAR.
During some time, there was a rough separation between corporate and securities law in the US. However, there is a distinction to be made between the two. According to the securities law, a public company must make disclosures to investors. The corporate law aims to regulate the internal affairs of the corporation through certain norms.
Contact us your international business attorney in Florida to learn more about the difference between corporate and securities law. This knowledge is essential for conducting your business activity.