What is a corporation?
According to the dictionary, a corporation is: “an organized body, especially a business that has been granted a state charter recognizing it as a separate legal entity having its own rights, privileges, and liabilities distinct from those of the individuals within the entity.” A corporation can acquire assets, enter into contracts, sue or be sued, and pay taxes in its own name. Corporations issue shares of stock to individuals supplying ownership capital and issue bonds to individuals lending money to the business.
SEPARATE LIFE Assuming that a corporation is properly formed and maintained, it is an entity with a legal existence that is separate and distinct from its owners (shareholders). And is a separate “person” for tax purposes. A corporation is generally in existence perpetually until either affirmative action is taken to dissolve the corporation or until the corporation is dissolved by operation of law for failure to properly maintain its existence…i.e. By failing to file annual reports or take other statutorily required actions. WHO OWNS A CORPORATION? A corporation is owned by its shareholders. Each shareholder owns a percentage of the total equity of the corporation based upon the number of shares held by that shareholder to the total amount of shares of the corporation’s stock that are issued and outstanding. Certain major transactions, such as dissolution and sale of substantially all of the corporation’s assets require the approval of the shareholders. WHO MANAGES THE CORPORATION’S
A corporation is considered by law to be a unique entity separate from those that own the corporation. As an individual entity, a corporation can be taxed, sued and can enter into contractual agreements. The shareholders of the corporation actually own the corporation, and they elect a board of directors to oversee the major decisions and policies. The board of directors are responsible for appointing corporate officers who end up running the day-to-day operations.
Under law, a corporation is considered to be a legal person distinct from the shareholders who own it. This means that individual shareholders are not personally liable for the debts and obligations of the corporation. If a corporation fails the shareholders will only lose the assets they originally invested to purchase their shares. In a corporation, income is taxed at two levels: first on income for the corporate entity, and then at the shareholder level where shareholders are taxed on any dividends they have received. You create a corporation by filing Articles of Incorporation with the business regulatory body in your jurisdiction. The document that governs internal business activities of the corporation are called ‘Bylaws’. In most jurisdictions you do not have to file your bylaws.
A business entity made up of individuals, but having its own legal character, a corporation comes into existence when articles of incorporation are filed in your state of choice. Once it’s formed, your corporation will be legally able to negotiate deals, maintain assets, enter into and defend itself against lawsuits, and more. One of the corporation’s defining features is that it personally protects its owner from liability against corporate debts.
