What is the definition of corporation?

Answer 1

A corporation, in terms of management accounting, is "A living person". This is to say that no matter how long the company is in business, who the executive management may be or what products/services are available from the company - it has an indefinate life-span, and for tax reasons, is self-supporting. A corporation (Being "Incorporated") also means that the entity can engage stakeholders in the form of stock. A "Listed Public Company" is a corporation that sells stock on the NY Stock Exchange (Or any number of other national or international stock exchanges) - and as a result, can fund it's own development with money gained by public investment. In return for their investment, stockholders expect dividends to be paid-out for the money they have invested. If you buy one share of stock for $100.00 and the company pays you $5.00 in dividend for that share - you have made a 5% capital gain on your investment. You can sell your $100.00 share at any time, but you most likely want to see the company grow, and your $100.00 share of stock increase in value to $120 or $150 dollars... as long as you hold your stock in the company, it can invest your money and hopefully grow. As it grows, your investment should grow and show profit. This is not a guarantee however. In some cases, your $100.00 share of stock may lose value, and you may end up with only $50.00 of your investment. If the stock has not paid enough dividends to cover the balance loss, you lose money. Corporations are also required to have a management board. This is usually a CEO, CFO, Chairman and President. There are other director and executive-level members of the board, and usually major stock-holders (part-owners) of the company serve on the board. The executive board makes major strategic decisions about the direction of the company, and then turns to managers within the organization to carry-out those directives. In contrast, a single person who runs their own business, is known as a sole-proprietor. As such, the person could not sell stock, but they could obtain money from private-party investors. The only real issue (amd major difference) between a corporation and a sole-proprietor is that a corporation protects the management from legal and financial ramifications. If you sue a corporation, you can only go after the corporation's assets. You cannot go after the personal assets of any employee of a corporation. (In rare cases this may not apply, but it is mostly the case). A sole-propriter, on the other hand, is personally accountable for all the actions on behalf of his company. If you run your own business, and someone files a lawsuit against your company, you may lose your house, savings and any other personal property that cannot be covered by your company assets. This is one of the major reasons why people form corporations, limited liability partnerships or S-Corps...