corporation

cor·po·ra·tion   (kôr'pə-rā'shən)    n.   A body that is granted a charter recognizing it as a separate legal entity having its own rights, privileges, and liabilities distinct from those of its members. Such a body created for purposes of government. Also called body corporate. A group of people combined into or acting as one body. Informal A protruding abdominal region; a potbelly.

corporation

A business organization owned by a group of stockholders, each of whom enjoys limited liability (that is, each can be held responsible for losses only up to the limit of his or her investment). A corporation has the ability to raise capital by selling stock to the public.

Corporation

A legal entity that is separate and distinct from its owners. Corporations enjoy most of the rights and responsibilities that an individual possesses that is, a corporation has the right to enter into contracts, loan and borrow money, sue and be sued, hire employees, own assets and pay taxes.

The most important aspect of a corporation is limited liability. That is, shareholders have the right to participate in the profits, through dividends and/or the appreciation of stock, but are not held personally liable for the company's debts.

Investopedia Commentary

A corporation is created (incorporated) by a group of shareholders who have ownership of the corporation, represented by their holding of common stock. Shareholders elect a board of directors (generally receiving one vote per share) who appoint and oversee management of the corporation. Although a corporation does not necessarily have to be for profit, the vast majority of corporations are setup with the goal of providing a return for its shareholders. When you purchase stock you are becoming part owner in a corporation.

Corporations are often called "C Corporations".

Related Links

Stock Basics Tutorial
Knowing Your Rights As A Shareholder

See also: Common Stock, Corporate Bond, Corporate Finance, Crown Corporation, Fortune 500, Multinational Corporation, Sole Proprietorship, Subchapter S

Also spelled: Corp, Corp.

corporation

An organized body, especially a business, that has been granted a state charter recognizing it as a separate legal entity having its own rights, privileges, and liabilities distinct from those of the individuals within the entity. A corporation can acquire assets, enter into contracts, sue or be sued, and pay taxes in its own name. Corporations issue shares of stock to individuals supplying ownership capital and issue bonds to individuals lending money to the business. The corporation is a desirable organization for a business entity for a variety of reasons including the increased capability such an entity has to raise capital. Most large firms, especially those engaged in manufacturing, are organized as corporations. All stocks sold in the primary market and traded in the secondary market are shares of corporate ownership. Compare partnership, proprietorship. See also incorporate, limited liability, unlimited liability.

Main Entry: cor·po·ra·tion
Pronunciation: "kor-p&-'rA-sh&n
Function: noun
Etymology: Late Latin corporatio, from Latin corporare to form into a body, from corpor- corpus body
: an invisible, intangible, artificial creation of the law existing as a voluntary chartered association of individuals that has most of the rights and duties of natural persons but with perpetual existence and limited liability —see also PIERCE —compare ASSOCIATION, PARTNERSHIP, SOLE PROPRIETORSHIP

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close corporation
/'klOs-/
: a corporation whose shares are held by a small number of individuals (as management) and not publicly traded; specifically : SMALL BUSINESS CORPORATION in this entry called also closely held corporation —compare PUBLIC CORPORATION 2 in this entry

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foreign corporation
: a corporation organized under the laws of a state or government other than that in which it is doing business

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government corporation
: PUBLIC CORPORATION 1 in this entry

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moneyed corporation
: a corporation (as a bank) authorized to engage in the investment, exchange, or lending of moneyed capital

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municipal corporation
: a political unit created or otherwise given corporate status (as by a charter) by a superior governing authority (as a state) and endowed with powers of local self-government (as eminent domain); broadly : a public corporation (as a utility) created to act as an agency of administration and local self-government
NOTE: As a result of its incorporation, a municipal corporation has the capacity to sue and be sued. Citizens as well as officials are usually considered part of a municipal corporation.

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professional corporation
: a corporation organized by one or more licensed individuals (as a doctor or lawyer) to provide professional services and obtain tax advantages

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public corporation
1 : a government-owned corporation (as a utility or railroad) engaged in a profit-making enterprise that may require the exercise of powers unique to government (as eminent domain) called also government corporation publicly held corporation
2 : a business corporation whose stocks are publicly traded called also publicly held corporation —compare CLOSE CORPORATION in this entry

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S corporation
: a small business corporation that is treated for federal tax purposes as a partnership called also subchapter S corporation

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shell corporation
1 : a corporation that exists as a legal entity without independent assets or operations as an instrument by which another company or corporation can carry out dealings usually unrelated to its primary business
2 : a corporation formed for purposes of tax evasion or acquisition or merger rather than for a legitimate business purpose

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small business corporation
: a corporation described in section 1361 of the Internal Revenue Code that has 35 shareholders or less and only one class of stock and that may if eligible elect to be an S corporation and taxed accordingly

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subchapter S corporation
: S CORPORATION in this entry