Corporation
A legal entity separate from its owners that can own property, enter contracts, and issue stock to raise capital.
What is Corporation?
A corporation is a legal entity chartered by a state government that exists separately from the individuals (shareholders) who own it, providing them with limited liability — shareholders can lose their investment but their personal assets are protected from corporate creditors. Corporations can own property, sue and be sued, enter contracts, and raise capital by issuing stock. They are governed by a board of directors elected by shareholders, which hires professional management. C corporations (the default form) pay corporate income tax on profits, and shareholders pay personal income tax on dividends — the 'double taxation' drawback. S corporations and certain other structures avoid double taxation through pass-through treatment. Corporations offer perpetual existence (they survive ownership changes), making them the dominant structure for large businesses.
Example
Apple Inc. is incorporated in California as a C corporation. Its shareholders — ranging from individual investors to institutional funds — own fractional interests through stock but bear no personal liability for Apple's debts or lawsuits. In FY2024, Apple paid approximately $29 billion in corporate income taxes (21% federal rate), and shareholders received dividends of about $0.25 per share per quarter, which were then taxed again at the qualified dividend rate (0–20%) on each investor's personal return.
Source: IRS — Corporations