Corporation

Definition

A corporation is a legal entity that is separate and distinct from its owners, providing limited liability to its shareholders. It can own assets, incur liabilities, and sell stock to raise capital.

5 Must Know Facts For Your Next Test

1. Corporations are governed by a board of directors elected by shareholders.
2. Shareholders of a corporation have limited liability, meaning they are not personally responsible for the corporation's debts.
3. Corporations can issue stocks and bonds as methods of raising capital.
4. Corporate governance involves mechanisms, processes, and relations used to control and to operate corporations.
5. Double taxation occurs in corporations where the company's profits are taxed at both the corporate level and again as shareholder dividends.

Review Questions

• What role does the board of directors play in a corporation?
• How does limited liability benefit shareholders in a corporation?
• What is double taxation and how does it affect corporations?

Related terms

shareholder: An individual or institution that owns shares in a corporation.

board_of_directors: A group of individuals elected to represent shareholders and oversee major decisions for the corporation.

limited_liability: A legal structure where an investor's financial risk is limited to their investment in the company.