What Is a Corporation?

A corporation is a legal entity that is separate and distinct from its owners and is established to co⛄nduct business or trade. It files tax returns with the Internal Revenue Service (IRS).

Corporations are formed by individuals who file 澳洲幸运5官方开奖结果体彩网:articles of incorporation in the state where they intend to operate. Corporations can enter into contracts, loan and borrow money, sue and be sued, hire employees, 🐓own assets, and pay taxes.

Importantly, corporations offer their owners 澳洲幸运5官方开奖结果体彩网:limited liability protection. Their shareholders profit thꦦrough dividends and stock appreciation, but they are not personally liable for the c✅ompany's legal or financial liabilities.

Most large businesses, such as Microsoft (MSFT) and Coca-Cola (KO), are corporations.

How a Corporation Works

A corporation is created when a business is 澳洲幸运5官方开奖结果体彩网:incorporated by an individual or a group of shareholders with a common goal. Shareholders share ownership ꧒of 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. A private or 澳洲幸运5官方开奖结果体彩网:closed corporation may have a sing📖le shareholder or several. Publicly traded corporations hav꧙e many shareholders.

In the U.S., corporations are created and regulated by state laws. Public corporations are regulated by federal law through the 澳洲幸运5官方开奖结果体彩网:Se༺curities and Exchange Commission (SEC).

Forming a Corporation

Th⛄ese are t🌄he basic steps to take to form a corporation:

1. Decide on a name. Some of the key factors in choosing the right name include memorability, relevance, and simplicity. It's also important that the name is available. You can conduct a trademark search on your state's database to see if it's free or if someone's already claimed the name.
2. Name a registered agent. This person must have a physical address in the state so they can receive any legal documents necessary to run the business.
3. File articles of incorporation with the state and file any registration fees.
4. Establish corporate bylaws. These are rules that highlight how the corporation will be structured and run.
5. Hold a board meeting and issue stock.
6. Get an 澳洲幸运5官方开奖结果体彩网:employer iden🌜tification number (EIN) through the IRS. You need this to file taxes and open bank accounts.

Depending on the type of company, you can open bank accounts and get credit. You may al🔴so need to get licenses and permits to operate and continue running.

Advanta𒁃ges and Disadvantages of Forming a Corporation

Legal Requirements of Corporations

Each state has distinct laws regarding incorporation. Most states require the owners to file articles of incorporation with the state. They can 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 澳洲幸运5官方开奖结果体彩网:public corporation is complex, as the company must ಞcomply with federal laws requiring full and publ𝔍ic disclosure of financial information to potential shareholders and the government.

Operating a Corporation

The shareholders of a corporation typically receive one vote per share and may hold an annual meeting during which they elect a 澳洲幸运5官方开奖结果体彩网: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 legal and financial liabilities, they owe a duty of care to the corporation and may be held responsible if they neglect this duty.

Some tax statutes also provide for the personal financial responsibility of the board of directors for a corporation's liabilities.

Liquidating a Corporation

Incorporation can be ended using the process called 澳洲幸运5官方开奖结果体彩网:liquidation. This may result from a voluntary decision to cea🤡se operations or mayꦆ 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 澳洲幸运5官方开奖结果体彩网:bankruptcy.

The Bottom Line

A corporation may be formed by an individ𓆉ual or group with a shared goal and can b🌌e a for-profit or not-for-profit entity.

Corporations possess many of the same legal rights and responsibilities as individuals. The limited liability protection offered by a corporation means that its executives, managers, and shareholders are not personally responsible for the company's liabilities (unless they derive from extreme misconduct).