Corporations enjoy most of the rights and responsibilities that an individual possesses; that is, a corporation has the right to enter into contracts, loan and borrow money, sue and be sued, hire employees, own assets and pay taxes. This is usually why once small partnerships evolve into stronger ones, the partners are usually incorporating if they were not already.

The most important aspect of a corporation is limited liability. That is, shareholders have the right to participate in the profits, through dividends and/or the appreciation of stock, but are not held personally liable for the company’s debts.

A corporation is created (incorporated) by a group of shareholders who have ownership of the corporation, represented by their holding of common stock. Shareholders elect a board of directors (generally receiving one vote per share) who appoint and oversee management of the corporation (CEO, President etc.). Although a corporation does not necessarily have to be for profit, the vast majority of corporations are setup with the goal of providing a return for its shareholders. When you purchase stock you are becoming part owner in a corporation, a shareholder.

Regarding the limited liability, there is a common false belief regarding bad management. In most jurisdictions, the management is liable of any losses the corporation might have provided they intentionally pushed the corporation into debt under their management. The managers involved might be also shareholders, but in this case the liability is yield by their manager status not because they are owners.

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