What is a corporation?
A corporation is a separate legal entity which exists separately from the shareholders and has a perpetual life. When the corporate formalities are properly followed, the shareholders, directors and officers of the corporation are not personally liable for any debts and obligations of the corporation. Corporations are required to keep formal minutes, have meetings, and record resolutions. The corporation (C corporation) is essentially taxed twice; once on its profits and again when shareholders are taxed on their personal income at the time they receive dividends (unless the corporation elects to be treated as a S corporation).
We hear the term all the time, but what exactly is a corporation? Webster called it “A body … formed and authorized by law to act as a single person, and endowed by law with the capacity of succession.” Historically in England (please forgive the apparent ethnocentricity, our U.S. law originates mostly in England), the King authorized a group of persons to undertake a business activity by granting a charter to their corporation. This charter prevented the investors from being legally a partnership, in which the partners’ entire wealth would be available to creditors if the business failed (instead, only their investment in the business could be lost). In the days when establishing trade with India was equivalent to a moon shot, this degree of protection spurred investment that otherwise might not have happened. We retain corporations today for the same reason: they serve the convenience of businesspeople. Along the way, many changes have come to pass and many types of business entiti
(back to top) A corporation is a separate legal entity existing under authority granted by state law. It has its own identity separate and apart from its shareholders/owners. A corporation is capable of continuing indefinitely. Its existence is not affected by the death or incapacity of shareholders, directors, or officers of the corporation.
A corporation is a legal entity, existing separately from its owners. A corporation is created when proper articles of incorporation (or the equivalent under the laws of a particular state) are filed with the proper state authority, and all fees are paid. State laws typically impose additional pre or post-creation requirements as well.
