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A business organized as a separate legal entity under state corporation law and having ownership divided into transferable shares of stock is a corporation.

A corporation is created by law, and its continued existence depends upon the statutes of the state in which it is incorporated. As a legal entity, a corporation has most of the rights and privileges of a person. The major exceptions relate to privileges that only a living person can exercise, such as the right to vote or to hold public office. A corporation is subject to the same duties and responsibilities as a person. For example, it must abide by the laws and it must pay taxes.

In 1819, Chief Justice John Marshall defined a corporation as “an artificial being, invisible, intangible, and existing only in contemplation of law. Being the mere creature of law, it possesses only those properties which the charter of its creation confers upon it, either expressly, or as incidental to its very existence”. This definition is the foundation for the prevailing legal interpretation that a corporation is an entity separate and distinct from its owners.

The holders of there shares (stockholders) enjoy limited liability; that is they are not personally liable for the debts of the corporate entity. Stockholders may transfer all or part of their shares to other investors at any time (i.e., sell their shares).

The ease with which ownership can change adds to the attractiveness of investing in a corporation. Because ownership can be transferred without dissolving the corporation, the corporation, the corporation enjoys an unlimited life.

Corporation is a legal form of business organization created by a government and considered an entity separate and a part from its owners.


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