Corporations FAQ

Questions:

• What is a corporation?
• What is "limited liability" and why is it important?
• How are corporations different from partnerships, sole proprietorships, and LLCs?
• Who should form a corporation?
• How do I form a corporation?
• Does running a corporation involve more paperwork than running other types of businesses?
• How is corporate income taxed?
• What is double taxation? Does it mean that corporate income is taxed twice?
• What is a professional corporation?
• Do I need to worry about securities laws when I issue stock in my corporation?

Answer:

What is a corporation?

What sets the corporation apart from all other types of businesses is that a corporation is an independent legal entity, separate from the people who own, control, and manage it. In other words, corporation and tax laws view the corporation as a legal "person" that can enter into contracts, incur debts, and pay taxes apart from its owners. Other important characteristics also result from the corporation's separate existence: A corporation does not dissolve when its owners (shareholders) change or die, and the owners of a corporation have limited liability -- that is, they are not personally responsible for the corporation's debts.

To learn more about the corporate structure, read Nolo's article Corporation Basics.