Court Reporter Practice Exam

Who governs corporations?

1. The federal government

2. The local government

3. The state government

4. The corporate board

The correct answer is: The state government

The governance of corporations primarily falls under the jurisdiction of the state government. Each state has its own corporate laws and regulations, which dictate how corporations are formed, managed, and dissolved. When businesses incorporate, they typically choose a state in which to register, and the laws of that state will govern the corporation's operations, the rights of its shareholders, and the responsibilities of its directors and officers. State governments provide a legal framework that defines corporate structure, compliance requirements, and governance practices. This includes the processes for corporate formation, maintenance of corporate records, the responsibilities of corporate officers and directors, shareholder rights, and procedures for ensuring legal compliance. As a result, the state government plays a crucial role in overseeing the activities of corporations, ensuring they operate within the legal parameters established by state laws.