Corporation

Most of us have probably heard of the word “corporation” at some point or another—however, do we actually know what it really means?

This is precisely what we’re about to clarify.

At this point, it’s worth noting that a corporation is sometimes referred to as a “legal person,” so don’t let this difference in terminology confuse you because both terms mean exactly the same thing!

In short, a corporation is a legal entity that’s separate from its owners.

Interestingly, corporations have a lot of the same rights that individuals have, such as the ability to:

• To enter contracts
• To loan funds
• To borrow money
• To sue and be sued
• To hire workers
• To own assets
• To pay taxes

Businesses established in all manner of industries across the globe use corporations. However, the exact legalities of what comprises a corporation vary from jurisdiction to jurisdiction. But, there’s one thing all corporations have in common: Limited liability.

By “limited liability” we mean that shareholders can benefit from the profits made from the business through dividends and stock appreciation without being personally liable for any debt the company gets itself into.

A corporation forms when a group of shareholders incorporate a business and take ownership of it. Consequently, shareholders all hold the same stocks and have a united goal in common, which is usually to produce a return for investors (unless it’s a charity corporation). So, each shareholder owns a specific percentage of the corporation which hinges on the number of shares they’ve purchased (which they’ll have to pay for upon their issuance).

Interestingly, a corporation can be formed by just one shareholder or several. More often than not, publicly-traded corporations have thousands of shareholders.

If you want to launch a corporation, you’ll have to create one and manage it under the corporate laws applicable within your jurisdiction. In the USA, a C Corporation is the most common kind of corporation.

What are the Roles of Shareholders?

Each shareholder usually has one vote for every share they have to elect a board of directors that oversee the daily management of the corporation. It’s the responsibility of the directors to implement the corporation’s business plan and to stick to it by all means necessary.

Famous Examples of Corporations

The Microsoft Corporation, The Coca-Cola Company, and Toyota Motor Corporation are all excellent examples of modern-day corporations.