Corporation: Introduction

Corporation: Introduction

Each year, hundreds of thousands of corporations are registered in this country, and it is not a coincidence that the largest businesses in the world are corporations. The corporation is a popular method of doing business for most people because it offers many advantages over partnerships and sole proprietorships.

The main reason people incorporate is to avoid personal liability. While sole proprietors and partners have all of their personal assets at risk, corporate shareholders risk only what they paid for their stock. With so many people ready to sue for any reason (or for no reason), the corporation is one of the few inexpensive protections left.

Creating a simple corporation is very easy. It is the purpose of this guide to explain, in simple language, how you can do it yourself. A simple corporation, as used in this guide, is one in which there are five or fewer shareholders, and all of them are active in the business.

If you plan to sell stock to someone not active in the business, sell stock in multiple states, or have any complex circumstances surrounding your corporation you should speak to an attorney. There can be serious consequences for failing to follow the laws around selling corporate stocks (called securities).

This guide also explains the basics of corporate taxation, but you should consult a tax guide or an accountant before deciding what is best for you. Starting with an efficient system of bookkeeping can save you both time and money.

LegalZoom can help you form a corporation, or an LLC. Get started by filling out an online questionnaire. We check your answers for consistency and completeness, file your paperwork with your state, and send you a final package. 

  • Corporation: Introduction
    Each year, hundreds of thousands of corporations are registered in this country, and it is not a coincidence that the largest businesses in the world are corporations. The corporation is a popular method of doing business for most people because it offers many advantages over partnerships and sole...
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  • What is a Corporation?
    A corporation is a legal person that can be created under state law. As a person, a corporation has certain rights and obligations, including the right to do business in its own name and the obligation to pay taxes. Some laws use the words "natural persons." A natural person refers only to human...
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  • Articles of Incorporation
    The Articles of Incorporation (in some states referred to as the Certificate or the Certificate of Incorporation) is the document that is filed with the appropriate state agency to start the corporation. In most states, this agency is the Secretary of State but may be called the Department of State...
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  • Shareholder
    A shareholder is a person who owns stock in a corporation. In many small corporations, the shareholders act as the officers and directors, but many shareholders do not have these roles in large corporations. Sometimes small corporations have shareholders who are not officers, such as when the stock...
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  • Board of Directors
    The board of directors is the controlling body of a corporation that makes major corporate decisions and elects the officers. It usually meets just once a year. In most states, a corporation can have one director (who can also hold all offices and own all the stock). In a small corporation, the...
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  • Officers
    Officers are appointed by the board of directors to run the day-to-day operations of the corporation. Commonly, and by law in many states, a corporation will have at least three officers: President Treasurer or Chief Financial Officer Secretary Officers do not have to be shareholders or directors,...
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