What is a Corporation?
A corporation is a legal entity created by individuals, stockholders, or shareholders, with the purpose of operating for profit. Corporations are allowed to enter into contracts, sue and be sued, own assets, remit federal and state taxes, and borrow money from financial institutions.
Corporation with buildings
The creation of a corporation involves a legal process called incorporation where legal documents containing the primary purpose of the business, name and location, and the number of shares and types of stock issued, are drafted.
The process of incorporation gives the business entity a distinct feature that protects its owners from being personally liable in the event of a lawsuit or legal claim.
What are the Common Types of Corporations?
A corporation can be created by a single shareholder or by multiple shareholders who come together to pursue a common goal. A corporate can be formed as a for-profit or a not-for-profit entity.
For-profit entities form the majority of corporations, and they are formed to generate revenues and provide a return to their shareholders, according to their percentage of ownership in the corporation.
Not-for-profit entities operate under the category of charitable organizations, which are dedicated to a particular social cause such as educational, religious, scientific, or research purposes. Rather than distribute revenues to shareholders, not-for-profit organizations use their revenues to further their objectives.
