What Is a Corporation?

A corporation is a distinct legal entity, often referred to as a “legal person” under the law. It is separate from the individuals who own (shareholders) or manage (officers and directors) the company. This separation gives the corporation a unique identity in the eyes of the law, allowing it to own property, enter into contracts, sue, and be sued independently of its owners.

Separation of Ownership and Management

One of the defining features of a corporation is the legal distinction between its shareholders and its managers. Shareholders are the owners, while the board of directors and officers handle daily operations and major decision-making. This division provides clarity in responsibility and shields owners from liability in most legal matters.

Personal Liability Protection

Perhaps the most important advantage of incorporating is the principle of limited liability. When a corporation is sued or incurs debt, the law generally protects the personal assets of its shareholders and officers. This means that their personal home, bank accounts, vehicles, and savings are typically not at risk—creditors can only pursue the corporation’s assets.

Why Choose a Corporation?

Incorporating a business is a smart strategy for entrepreneurs and investors seeking legal protection, credibility, and long-term growth. With a properly maintained corporation, you can reduce your personal risk, gain access to tax planning strategies, and build a stronger foundation for expansion.