A business corporation is a standalone legal entity with rights and responsibilities (just like individuals). They can own property and enter into contracts. They are owned by shareholders and operated by directors and officers.
Shareholders are not responsible for a corporation’s debts. They benefit from lower corporate tax rates and can raise capital more easily than partnerships or sole proprietorships. Unfortunately, business corporations are more expensive to form and operate because of stringent regulatory requirements.
A business corporation’s structure includes the following:
- Shareholders: Own at least one share of a corporation’s stock. Collectively, they own the corporation and get to vote on key business decisions. There can be different classes of shares and shareholders.
- Directors: Elected by shareholders and are responsible for operating and managing the business.
- Officers: Act on behalf of the directors to operate and manage the business. They must be registered and are almost always employees of the corporation.
A major limitation of a business corporation is that there is no real way to build social purpose into the governing documents. Successive directors may change or eliminate the social purpose your founders established.