Corporation is a legal entity that can own property, enter into contracts, pay taxes and be sued. Its owners are known as shareholders, and the company is managed by a board of directors.
The process of creating a corporation varies by state and country. It usually begins with filing articles of incorporation with the state secretary, which act as the birth certificate of a corporation, and setting out its general nature, how many shares it is authorized to issue, and the names of directors. Then the corporation creates bylaws, which outline how it will be run.
There are advantages to incorporating, such as limited personal liability for shareholders and the ability to raise capital. A corporation can also retain or pass along earnings in ways that are not possible for partnerships, sole proprietorships and LLCs, and it can give a business more credibility by being seen as more professional and legitimate than non-incorporated entities.
However, corporations often have problems and are criticized for being too large or diverse to operate efficiently; overloaded with debt; top-heavy with high-salaried executives; slow to innovate; and not taking into account the needs of employees and communities. In the US, corporate law has matured over centuries and is fairly consistent across states and courts. There are no educational requirements or licensures to incorporate, but the process can be complex and requires some level of skill, business familiarity, and time to be done correctly. This is why it’s often recommended to seek advice, be it from a lawyer or a consultant with experience in this area.
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