The
most significant aspect of a corporation is that it is considered by
law to be
a separate legal entity, and as such, is regulated by state statutes.
Since a
corporation is considered a separate legal entity, the shareholders can
come
and go into the corporation without affecting the legal status of the
corporation. A corporation is liable for its own debts and obligations
and
unless the "corporate veil" is pierced, a shareholder can only be
liable for their investment into the corporation.
Corporations
are managed by a Board of Directors and their officers. Those
individuals who are
shareholders are owners of the corporation and may also be on the Board
or be
an officer. These individuals are responsible for observing the
numerous
formalities involved in running a corporation, i.e. conducting
meetings,
keeping corporate minutes books, etc.
In
terms of taxation, corporations are subject to taxation by State, local
and
federal governments just like an individual. Shareholders are also
taxed on any
dividends they may receive from the corporation.
Individuals
forming a corporation may elect the Subchapter S status. This type of
election
eliminates the double taxation aspect mentioned above and allows the
income of
the corporation to be passed down to the shareholders as ordinary
income.