A Corporation is a legal business entity that can enter into contracts, own assets and incur debt while shielding its owners from liability through a process of incorporation. Owners of a corporation must follow strict requirements and formalities when filing for incorporation. Corporations are chartered in the state where they operate and can be taxed based on their type of operations, number of shareholders, management structure and the purpose for which they were created.
A corporation’s purpose is typically defined by its shareholders and managers, but some companies are seeking to redefine the corporate purpose beyond shareholder enrichment. Recent movements, including the Business Roundtable’s commitment to delivering value to all stakeholders, show that there is a strong desire for businesses to create solutions that benefit people and planet while driving profit and growth.
Most large businesses are corporations, including such well-known brands as Microsoft and Coca-Cola. Corporations are managed by a board of directors, which is elected by the shareholders and sets policies and priorities for the company. Directors also determine the company’s goals and oversee day-to-day operations. Shareholders have voting rights, but their influence over the company’s decisions is limited.
If you are considering whether or not to incorporate, you should seek guidance from an attorney and a certified small business tax advisor. The experts can evaluate your business, decide if a corporation is the best structure and help you file if it is. Incorporating can have significant financial, operational and legal implications for your business, so it’s important to make an informed decision based on your specific needs.