Corporation: Glossary Definition
Definition of Corporation:
A corporation is the most popular form of legal entity in the United States. Qualities of a corporation include:
- Limitation of liability/Protection of personal assets. The owners of a corporation are called stockholders. Stockholders are generally shielded from the debts and obligations of the corporation. Creditors are generally only able to pursue claims against the business and its assets, and not against the stockholders.
- Transferable ownership. Ownership of a corporation is in the form of stock. stockholders own shares of stock. Generally, a stockholder may transfer shares of stock to another party, without complex legal requirements and without affecting the legal structure of the corporation.
- Taxation. Profits of a corporation are taxed at two levels (i.e., double taxation) – first at the corporate level and then when profits are distributed to stockholders, the stockholder then pays a tax on the distributed profits. Stockholders of corporations formed in the United States may also be permitted to elect to make an “S Corporation” election. See “S Corporations” which provide an exception to the double taxation of corporations.
- Raising funds through sale of stock. Capital from investors can be raised for corporations easily through the sale of stock.
- Perpetual Existence. A corporation typically survives perpetually (until voluntarily or statutorily/administratively dissolved). A corporation’s existence does not end upon the death of stockholders, directors, or officers of the corporation.
