Corporation
What Is Corporation?
A corporation is a legal business entity that exists separately from its owners. Corporations can own assets, enter contracts, and conduct business independently.
Shareholders own corporations, but the corporation itself is responsible for its debts and obligations.
Why It Matters
Corporations provide legal protection to owners by limiting personal liability. This means shareholders typically are not personally responsible for business debts.
Corporations also allow businesses to raise capital through investors.
How Corporation Works
A corporation is formed by filing legal documents with the state government.
Key features include:
- shareholders (owners)
- directors who oversee governance
- officers who manage daily operations
Corporations must follow corporate governance rules and tax regulations.
Example
A large technology company incorporated under state law operates as a corporation owned by shareholders.
Corporation vs Sole Proprietorship
- A corporation is a separate legal entity.
- A sole proprietorship is owned and operated by one individual without legal separation.
FAQs About Corporations
Do corporations pay taxes?
Yes. Many corporations are subject to corporate income tax.
Who owns a corporation?
Shareholders own the corporation.
Can corporations raise investment capital?
Yes. They may sell shares to investors.
Related Terms
