Overview of Corporation Basics
A corporation brings to mind Microsoft, General Motors, or other Fortune
500 companies. Yet 25 million corporations are owned by individuals and
families who operate small businesses.
It is easy to understand how to effectively use a corporation for protection.
A corporation is a legal entity authorized to conduct business or own
assets as though it were a living person. However, unlike a natural person,
a corporation has a perpetual existence. Its shareholders invest in the
corporation and share in its profits. Here are some other important features
of a corporation:
— Created by state law: Each state sets its own requirements to establish
and maintain a corporation.
— Distinct legal entity: A corporation is a separate legal entity. It
is separate in every way from its shareholders. For example, the corporation
enjoys the same constitutional rights as a natural person. Assets titled
to a corporation are owned by the corporation, not its corporate shareholders.
— Limited liability of shareholders: The key benefit of incorporating
is that a corporation protects the personal assets of its stockholders,
officers and directors from the debts of the incorporated business. Since
a corporation is a legal entity distinct from its shareholders, its shareholders
have no personal liability for the corporate debts. Shareholders can lose
only their investment in the corporation (the amount they paid for their
shares or loaned to the corporation) if the corporation is sued or files
— Unlimited existence: Unless the corporate articles state otherwise,
the corporation lasts in perpetuity. A stockholder's death does not
terminate the corporation.
— Centralized management: Directors elected by the shareholders set corporate
policy. Daily operations are the responsibility of the corporate officers,
who are appointed and supervised by the board (the president may be elected
by the shareholders).
— Flexible structure: Shareholders own the corporation and elect the board.
The board of directors must have at least one director, however, some
states require more. One individual can, in most states, be the corporation's
sole shareholder, director, president, secretary, and treasurer.
YES, YOU CAN LOSE EVERYTHING!
You may think that your wealth is safe and that you don't need protection.
But don't delude yourself and accept reality — for every 60
minutes you spend making money, spend 60 seconds thinking about how to