A corporation is a legal entity created under the laws of a state designed to establish the entity as a separate legal body with its own distinct privileges and liabilities, separate from the individuals who create and operate it. The corporation can acquire, own and dispose of property in its own name. It can also incur liabilities and enter into contracts.Because a corporation has legal standing itself, its owners are partially protected from responsibility for its actions. The owners of a corporation also have limited financial liability. For example, they are not held responsible for corporate debts.Most corporations are used to conduct business and are created through registration.
Corporations are created by filing the required documents with a particular state government, a process known as “incorporation”. Corporations are regulated by the laws enacted by the government and must appoint a registered agent and provide the main address of the registered office. They may also be required to appoint a legal representative of the corporation.
Only certain corporations such as banks are chartered. Others file Articles of Incorporation with the state government as part of the registration process. The Articles of Incorporation is a document which establishes the general nature of the corporation, the amount of authorized share capital to be issued and the names and addresses of the directors. Once the Articles of Incorporation is approved, the directors meet to establish the bylaws which govern the internal operations of the corporation.
In the United States, only companies that have been formally incorporated according to the laws of a particular state are called a “corporation”. The federal government can only create corporate entities pursuant to relevant powers in the U.S. Constitution. Almost all corporations in the U.S. are incorporated under the laws of a particular state.
All states have a general corporation law which authorizes the formation of private corporations without having to obtain a charter from the state legislature. Many states have separate, self-contained laws which authorize the formation and operation of certain types of corporations that are completely independent of the state general corporation law.
A corporation is legally a citizen of the state where it is incorporated. Most corporations choose to incorporate in a state with laws that benefit its business interests. Many large corporations incorporate in Delaware for its favorable corporate tax and disclosure laws. Corporations that seek privacy and/or asset protection usually incorporate in Nevada, a state that does not require disclosure of share ownership.