what is a corporation 
a corporation is a legal entity that is separate and distinct from its owners under the law corporations possess many of the same rights and responsibilities as individuals they can enter into contracts loan and borrow money sue and be sued hire employees own assets and pay taxes a distinguishing characteristic of a corporation is limited liability its shareholders profit through dividends and stock appreciation but they are not personally liable for the company s debts almost all large businesses are corporations including microsoft corporation and the coca cola company investopedia julie bangincorporationa corporation is created when a business is incorporated by a group of shareholders with a common goal shareholders share ownership of a business as represented by their holding of stock shares corporations may return a profit to their shareholders some corporations such as charities and fraternal organizations are nonprofit or not for profit a private or closed corporation may have a single shareholder or several publicly traded corporations have many shareholders in the u s corporations are created and regulated by state laws public corporations are regulated by federal law through the securities and exchange commission sec 1for their owners both a limited liability company llc and a corporation offer similar legal advantages a primary advantage is that shareholders cannot be held personally liable for the debts of either entity legal requirementseach state has its own laws regarding incorporation most states require the owners to file articles of incorporation with the state and then issue stock to the company s shareholders the shareholders elect a board of directors in an annual meeting turning a private corporation into a public corporation is complex as the company must comply with federal laws requiring full and public disclosure of financial information to potential shareholders and the government operating a corporationthe shareholders of a corporation typically receive one vote per share and may hold an annual meeting during which they elect a board of directors the board hires and oversees the senior management responsible for the corporation s day to day activities the board of directors also executes the corporation s business plan although the members are not personally responsible for the corporation s debts they owe a duty of care to the corporation and can incur personal liabilities if they neglect this duty some tax statutes also provide for the personal liabilities of the board of directors liquidating a corporationincorporation can be ended using the process called liquidation this may result from a voluntary decision to cease operations or may be forced by the financial collapse of the business a company appoints a liquidator who sells the corporation s assets the company pays off its creditors and distributes any remaining money to the shareholders an involuntary liquidation is triggered by the creditors of a corporation that has failed to pay its bills if the situation cannot be resolved it is followed by a filing for bankruptcy 