A corporation is a separate and distinct legal entity created under state law and owned by its shareholders, and therefore protects its owners from personal liability for corporate debts and obligations (up to the amount invested in the corporation). A corporation by default (referred to as a C corporation) is taxed at two levels (i.e. double taxation). In other words, a C corporation pays a corporate tax on its corporate income (the first tax), and then, the C corporation distributes profits to shareholders who pay income tax on those dividends (the second tax).

Corporation formation requires filing with the appropriate state agency as well as a filing fee like an LLC and LP, but unlike a general partnership