Corporation is a legal structure that allows you to take on the risks that allow for growth without exposing you personally to any financial liability beyond your initial investment in the company. This protection, which is referred to as a corporate veil, is the most significant reason people form corporations.
Once a business becomes a corporation, it must file articles of incorporation with the state in which it plans to do business. These articles outline the general nature of the corporation, the number of shares it is authorized to issue and the names and addresses of its directors. The corporation must also draft its own bylaws to define how it will operate, including how meetings will be called, voting procedures and ownership will be documented.
The governing body of a corporation is known as its board of directors, which hires the senior management team that executes the company’s day-to-day activities. The board is also responsible for drafting and filing tax returns. While the corporation’s shareholders do not have control over the company’s day-to-day operations directly, they elect the board of directors and are obligated to meet at least annually to assess the past performance of the company and to plan for its future.
A common view in the United States is that corporations exist for their shareholders’ profit, and this has been reinforced by centuries of court cases and popular culture. But there is a movement in both academics and businesspeople to create new types of companies that combine profit with social purpose, such as the low-profit limited liability company (L3C) and benefit corporation (B Corp). These new structures are a response to the belief that a business should be motivated by more than simply making money.
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