A corporation is a legal entity that is separate and distinct from its owners. Under the law, companies have many of the same rights and responsibilities as individuals. They can enter into contracts, lend and borrow money, sue and be sued, hire employees, own assets, and pay taxes. A corporation is a legal entity, which means that it is an entity separate from its owners, who are called shareholders.
A corporation is treated as a “person with most of the rights and obligations of a real person.” A corporation is not allowed to hold public office or vote, but it does pay income taxes. It can be established as a for-profit or not-for-profit organization and can be publicly or privately owned. The shares of a public company are traded on a stock exchange. There can be thousands, even millions, of shareholders in a public company.
The shares of a private company are not traded on an exchange and there are usually only a small number of shareholders. It's relatively easy for a corporation to raise capital by issuing shares. Buying shares in a corporation is often attractive to an investor because the shareholder has limited liability and the shares are easily transferable. In addition, many people can become shareholders by investing relatively small amounts of money.
A corporation is a legal entity created by individuals, shareholders, or shareholders for the purpose of operating for profit. Companies can enter into contracts, sue and be sued, own assets, remit federal and state taxes, and borrow money from financial institutions. The creation of a joint stock company involves a legal process called constitution in which legal documents are drafted that contain the main purpose of the company, the name and location, and the number of shares and types of shares issued.
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