What is a corporation?
A corporation is a separate legal entity that exists independently from its owners. A corporation comes into existence when articles of incorporation are properly created and maintained, filed with the prescribed fees, and accepted by your State’s Secretary of State. Any entity that transacts business as a corporation is required to file documents of incorporation and pay the appropriate state filing fee. Benefits of Corporations: • LIMITED LIABILITY – One primary benefit of incorporating your business is limited liability. If you maintain a corporation’s legal status properly, and avoid personally guaranteeing the corporation’s obligations, the corporation, and not you personally, would be solely responsible for its obligations. • The single most important reason people cite for forming a corporation when they do business is to safeguard the personal assets of the owners – that is the shareholders or stockholders of the corporation – against potential claims from creditors.
A corporation (also called “company”) is a legal entity that has its own legal personality which is distinct from its owners (called shareholders) and the individuals who manage and run its affairs and business (called directors and officers). The creation of a corporation occurs following the proper filing of Articles of Incorporation (also called a Charter, Certificate of Incorporation or Letters Patent) with the relevant government department or authority. Every corporation is comprised of shareholders, directors and officers. Shareholders, as the name implies, are the ones who hold (i.e., own) the shares in the corporation. By reason of the votes that are usually attached to the shares, the shareholders control the corporation. If there is only one shareholder, that person has absolute control of the corporation. If the corporation has numerous shareholders, control of the corporation depends on who has a majority of the voting shares.
The corporation is a separate and distinct legal entity apart from the owners of the business. A corporation can own property, enter into contracts, and conduct business under its own name. It needs resources and investment in order to operate, and the amount of each varies from industry to industry.
A corporation is a distinct and independent entity that is separate from its owner. It is legally endowed with rights and responsibilities and has a life of its own independent of the owners (shareholders). It has been defined by the United States Supreme Court as “an artificial being, invisible, intangible and existing only in contemplation of the law.” In essence, a corporation can do almost anything an individual can. Own property, open a bank account, establish credit, obtain a social security number (called a tax identification number), “have children” by setting up subsidiaries, and even “get married” by merging with other corporations and taking their name. The owners of the corporation are called stock or share holders. Unlike a sole proprietorship, the owners are not liable for the corporation’s debts. If a corporation files for bankruptcy protection, its creditors cannot force the shareholders to pay back the corporation’s debts.
