Definition
A corporation is a business that is organized as a separate legal entity from the owners of the company. Ownership in a corporation is typically determined through the issuing of shares of common stock. One of the distinguishing characteristics of a corporation is limited liability.
Explanation
Corporations are created by filing a corporate charter with a state. Once the new corporation has been approved by the state, it is a legal entity that is separate from its owners. This limits the responsibilities of the owners for the liabilities of the corporation.
Almost all companies are formed as limited liability organizations. So while the owners of the company could lose their investments, they could not be held liable for the money owed to creditors.
Related Terms
- A business entity that is owned by only one person is known as a single or sole proprietorship. The owner of a sole proprietorship is entitled to all of the profits of the business as well as its debts.
Moneyzine EditorSeptember 21st, 2023 - The term partnership is used to describe an unincorporated business entity that is owned by two or more persons. Partners own assets together, share in the business profits or losses, and are typically jointly liable for debts, legal actions, and the payment of taxes.Moneyzine EditorSeptember 20th, 2023
The term limited liability company, or LLC, is used to describe a business structure whereby the owners and managers of that organization are afforded limited liability exposure.Moneyzine EditorJanuary 23rd, 2024- The financial accounting term organization costs refer to those expenditures incurred during the formation and launch of a corporation. Organization costs can include legal payments, state and federal registration and incorporation fees, promotions, and charges associated with the underwriting of stocks and bonds.Moneyzine EditorSeptember 20th, 2023
The term business organization refers to the form of entity used by a company to conduct business. Sole proprietorships, partnerships, and corporations are the three forms of a business organization.Moneyzine EditorJanuary 9th, 2024
The term articles of incorporation refer to documents submitted by a business entity to a government agency to legally register the creation of a corporation. The articles of incorporation are typically submitted to the Secretary of State or Department of the Treasury using a form that is unique to each state.Moneyzine EditorSeptember 18th, 2023
.jpg)
