Corporate Differences Between the U.S. and the EU

By Mary McCarthy

Comparative corporate law is a massive and complex topic, but everything essentially boils down to regulations, cooperation, and public opinion. 

In the United States, a corporation is defined as a legal entity that is separate and distinct from its owners in the eyes of the law. Corporations are essentially afforded the legal rights of an individual person. Corporations can conduct business, borrow money, pay taxes, own assets, employ people, and enter legal disputes. Corporations in America have a significant focus on limiting liability and risk for employees and shareholders. Corporations in the EU have a similar focus on shareholder protection and limiting financial risk. In the U.S., each state has individual corporate laws and practices, with federal laws setting a baseline standard. In the EU, corporate law contends with entirely separate countries, languages, and cultures cooperating with one another. Since the EU was formed in 1957, there have been significant efforts to allow people to conduct business within the EU with relative ease. As the internet connects consumers more and more globally, smooth cooperation between different economies and territories is more essential than ever.

While the U.S. has federal regulations, there is not a cohesive universal European corporate law playbook. EU regulations apply to all EU countries, and there are business practices and minimum regulations set by the EU. Ultimately the foundation of EU regulations is cooperation between countries. In the EU, one popular business option is incorporating your company as an SE or “Societas Europea,” which essentially allows companies to conduct business in the EU under a single European brand name. These are public limited liability companies that operate within the EU.

Corporate law itself is complex and varies depending on where you are in the world, but there are notable social differences with corporations in the EU compared to America. There seems to be a more concrete emphasis on CSR (corporate social responsibility) in the EU. The value of environmental sustainability is more prevalent in EU legislature and business proposals. Public opinion of corporations has a massive impact on sales and reputation. In many cases, efforts to improve sustainability and positive CSR are the results of informed consumers who demand transparency and accountability from corporations. Understanding the societal, economic, and social differences between these two areas of corporate law can help you be a more informed citizen of the world.



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