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What Is a Corporation?

A corporation is a legal entity that is also afforded the same legal rights as a person. The corporation is considered as a separate entity from the shareholders and the employees of the corporation. A corporation may be comprised of a single person (called a sole corporation) or a group of people (called an aggregate corporation).

A corporation’s legal existence is as a fictitious person. This allows the corporation to give limited protection to the people who are part of the corporation. This limitation of liability is considered one of the benefits of incorporation. This is also the reason why smaller businesses are eager to turn their business into a corporation. Those who are involved in a business that is highly litigated will get the most benefits from incorporation.

A business can become a corporation in a specific country. The newly formed corporation is held liable within the laws of the particular country or state. A corporation may decide to issue stocks, which can either be public or private. The corporation can also become a non-stock. A corporation that issues stocks will be managed by the shareholders. The majority owners are usually made into members of the board and those who have the largest number gets the controlling interest. The setup with a board of directors is the most common in a corporation. The board decides on the corporation’s major moves as long as, in theory, the decisions have a positive impact on all of the individual shareholders and will improve the corporation.

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