A legal entity or business structure that is distinct and where the business is entirely separate from the shareholders. When setting up a business, a corporate structure can be the most advantageous way of doing so. A corporation will have all the legal rights of an individual, apart from a few limitations such as the right to vote.
A corporation is given the right to exist by an issuer in the state where the corporation is formed. When you wish to run a business in more than one state, you would need to file for qualification. In this process, you will need to decide which state your business will legally operate in, and you will be liable to pay fees to other states where you wish to do business.
The corporate structure is used globally for businesses of all types. The legal status of the corporation does differ depending on the country or jurisdiction in which it was formed, but no matter where the corporation exists it benefits from limited liability. This means that while shareholders have a right to share in the profits of the corporation, they cannot be held responsible for the debts incurred by the corporation. This is a very important protection, and one of the top benefits of the corporate structure.
Almost every well-known business operates under the corporate structure. Nike, Wal-Mart, Facebook, and Coca-Cola are all corporations.
The corporation is created through a legal process where a group of stakeholders decide to issue stock and incorporate to pursue a common goal. While most corporations operate for profit, it is also possible to have non-profit corporations. When shares are issued the shareholders are only responsible for paying for their shares when issued. These shares are often later traded on the open market, and the value fluctuates based on public demand.
A corporation can have a handful of shareholders, or it can have many. In the case of well-known businesses there are often millions of shareholders.
The corporation is formed and regulated by the corporate laws in its jurisdiction of residence. Some jurisdictions have more appealing regulations and a quite popular for the formation of corporations. These include the states of Delaware and Nevada in the U.S., as well as Malta or Hong Kong internationally. In the United States, the most common form of corporation is known as a “C Corporation.”