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The Definition of a Corporation
What is the legal definition of a corporation? Learn how, since a corporation is an entity in its own right, its owners (the shareholders) enjoy limited liability and are legally shielded from the corporation's liabilities and debts.
A corporation is defined as a legal entity or structure created
under the authority of the laws of a state consisting of a person
or group of persons who become shareholders. The entity's existence
is considered separate and distinct from that of its members. Like
a real person, a corporation can enter into contracts; sue and be
sued; pay taxes separately from its owners; and do the other things
necessary to conduct business. Since a corporation is an entity in
its own right, it is liable for its own debts and obligations. As a
result, providing that corporate formalities are followed, the
corporation's owners (the shareholders) typically enjoy limited
liability and are legally shielded from the corporation's
liabilities and debts.
The existence of a corporation is not dependent upon who the owners
or investors are at any one time. Once formed, a corporation
continues to exist as a separate entity even when shareholders die
or sell their shares.
A corporation continues to exist until the shareholders decide to dissolve it or merge it with another business.
Corporations are subject to the laws of the state of incorporation and to the laws of any other state in which the corporation conducts business. Corporations may thus be subject to the laws of more than one state. All states have corporation statutes that set forth the ground rules as to how corporations are formed and maintained.
Read Advantages and Disadvantages of Forming a Corporation to better understand the pros and cons of this particular business structure.
Research the various legal business structures available and find the right fit for your new business at AllBusiness.com.
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