{"id":5556,"date":"2021-09-20T15:36:23","date_gmt":"2021-09-20T20:36:23","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/smallbusiness\/starting-a-business\/what-is-a-corporation.html"},"modified":"2021-09-20T15:36:23","modified_gmt":"2021-09-20T20:36:23","slug":"what-is-a-corporation","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/smallbusiness\/starting-a-business\/what-is-a-corporation.html","title":{"rendered":"What Is a Corporation?"},"content":{"rendered":"\n<div class=\"fl-sectionWithSidebar fl-container fl-flex fl-flex-wrap fl-gap30  wp-container-core-columns-is-layout-9d6595d7 fl-sectionWithSidebar fl-container fl-flex fl-flex-wrap fl-gap30\">\n    \n    <div class=\"fl-section-main fl-page-articles fl-section-main fl-section-main-full-width\">\n        <h1 class=\"fl-no-margin-top\">What Is a Corporation?<\/h1>\n<section class=\"fl-gutenberg-byline\">\n    <div class=\"fl-gutenberg-byline-content\">\n                    By <a href=\"https:\/\/www.findlaw.com\/company\/our-team\/acacia-wilson-esq\/\">Acacia Wilson, Esq.<\/a> | Legally reviewed by <a\n                href=\"https:\/\/www.findlaw.com\/company\/our-team\/tim-kelly-j-d\/\">Tim Kelly, J.D.<\/a>\n                | Last updated\n        <time>\n                            September 20, 2021\n                    <\/time>\n    <\/div>\n\n            <div class=\"fl-gutenberg-byline-editorial-note fl-text-sm\">\n            <p>Editorial Note: We earn a commission from affiliate partner links on FindLaw. Commissions do not affect the editorial integrity of our legal content.<\/p>\n\n        <\/div>\n    \n    <details class=\"fl-gutenberg-byline-toggle fl-gutenberg-byline-legally-reviewed\">\n        <summary>\n            <i class=\"fl-gutenberg-byline-icon\" aria-hidden=\"true\"><\/i>\n            Legally Reviewed\n        <\/summary>\n\n        <div class=\"fl-gutenberg-byline-toggle-content\">\n            <p><em>This article has been written and reviewed for legal accuracy, clarity, and style by <a href=\"https:\/\/www.findlaw.com\/company\/our-team.html\">FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with <a href=\"https:\/\/www.findlaw.com\/company\/company-history\/editorial-policy.html\">our editorial standards<\/a>.<\/em><\/p>\n\n        <\/div>\n    <\/details>\n\n    <details class=\"fl-gutenberg-byline-toggle fl-gutenberg-byline-fast-checked\">\n        <summary>\n            <i class=\"fl-gutenberg-byline-icon\" aria-hidden=\"true\"><\/i>\n            Fact-Checked\n        <\/summary>\n\n        <div class=\"fl-gutenberg-byline-toggle-content\">\n            <p><em>The last updated date refers to the last time this article was reviewed by FindLaw or one of our <a href=\"https:\/\/www.findlaw.com\/company\/our-team\/contributing-authors.html\">contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please <a href=\"https:\/\/lawyers.findlaw.com\/?fli=bylinelink\" target=\"_blank\" rel=\"noopener\">contact an attorney in your area<\/a>.<\/em><\/p>\n\n        <\/div>\n    <\/details>\n<\/section>\n<p>A corporation is a legal entity formed by a business owner. If you&#8217;re considering starting up a business, you might be wondering what type of business entity is right for you. Forming a corporation is one option that can provide some benefits with taxes and personal liability.<\/p>\r\n<p><b><i>Form your corporation with confidence with&nbsp;<a href=\"https:\/\/legalzoomcominc.pxf.io\/c\/4851649\/2115291\/26746?subId1=what-is-a-corporation-in-content\" rel=\"sponsored noopener\" data-cta=\"Biz LZ - LATL Callout\" data-cta-url=\"legalzoom.com\" target=\"_blank\">our trusted partner LegalZoom.<\/a><\/i><\/b><\/p>\r\n<h2>Key Takeaways:<\/h2>\r\n<ul>\r\n<li>Owners of a corporation have protection for their personal assets.<\/li>\r\n<li>The type of business entity that you have affects the taxes on profits.<\/li>\r\n<li>You will need to file articles of incorporation and make bylaws to form a corporation.<\/li>\r\n<\/ul>\r\n<h2>Understanding Corporations<\/h2>\r\n<p>Different types of business structures have distinct advantages. One advantage of forming a <a href=\"https:\/\/legalzoomcominc.pxf.io\/c\/4851649\/2115291\/26746?subId1=what-is-a-corporation-&#038;auto-aff-c-corp\" class=\"diy-biz-affiliate\" rel=\"sponsored noopener\" data-cta=\"Biz Auto LZ - LATL Txt\" data-cta-url=\"legalzoom.com\" target=\"_blank\">corporation<\/a> is limited liability. Limited liability means that your personal assets are protected from the business&#8217;s creditors. A person who sues the business cannot take personal assets if you have limited liability.<\/p>\r\n<p>Forming a&nbsp;<a href=\"https:\/\/www.findlaw.com\/smallbusiness\/incorporation-and-legal-structures\/llcs.html\">limited liability company (LLC)<\/a>&nbsp;would also protect your personal assets. However, starting a corporation might be a better choice if you want to issue stock. Limited liability is not a feature of a sole proprietorship or partnership.<\/p>\r\n<h2>Corporate Tax Rates and Personal Income Tax<\/h2>\r\n<p>You may want to know how the type of business structure you have will affect your taxes. With a corporation, the Internal Revenue Service (IRS) taxes the business itself. Double taxation can happen if an owner gets a dividend, which is also taxed. However, there is a type of corporation that can solve the problem of double taxation. The IRS can tax a corporation as an S-corporation (S-corp). People who do not work for the corporation can use the <a href=\"https:\/\/www.kqzyfj.com\/click-100799097-15053486?sid=what-is-a-corporation-&#038;auto-aff-s-corp\" class=\"diy-biz-affiliate\" rel=\"sponsored noopener\" data-cta=\"Biz Auto LZ - LATL Txt\" data-cta-url=\"legalzoom.com\" target=\"_blank\">S-corp<\/a> status to avoid double taxation.<\/p>\r\n<p>In a sole proprietorship or <a href=\"https:\/\/legalzoomcominc.pxf.io\/c\/4851649\/2115288\/26746?subId1=what-is-a-corporation-&#038;auto-aff-llc\" class=\"diy-biz-affiliate\" rel=\"sponsored noopener\" data-cta=\"Biz Auto LZ - LATL Txt\" data-cta-url=\"legalzoom.com\" target=\"_blank\">LLC<\/a>, the IRS does not tax the business itself. Owners of a sole proprietorship or LLC have profits on their personal tax returns.<\/p>\r\n<h2>Forming a Corporation<\/h2>\r\n<p>You&#8217;re interested in forming a corporation, but you want to know what you will have to do. There are many steps to forming a corporation. One step to forming a corporation is filing articles of incorporation with the secretary of state (or other agency).<\/p>\r\n<p>The articles of incorporation should show the business name, address, and name of the registered agent. You will also need corporate bylaws. These documents may include the process for creating a board of directors.<\/p>\r\n<p>There are other duties after you form a corporation. There is a corporate structure, and you must have meetings each year and report on what is decided in those meetings.<\/p>\r\n<h2>Commonly Asked Questions<\/h2>\r\n<h3>Does It Cost Money to Form a Corporation?<\/h3>\r\n<p>There is a filing fee for the articles of incorporation. The filing fee is different from state to state. You may have other costs, too. For example, you might decide to hire a service to be your registered agent, or you might need to file a DBA name. There are separate fees for such services.<\/p>\r\n<h3>Does a Small Business Need To Be Incorporated?<\/h3>\r\n<p>You&#8217;re probably concerned about costs if you are starting up a small business. Is forming a corporation worth the expense? Consider the risk of personal liability that you may have with other types of business entities. A corporation is a separate legal entity and offers you protection. Also, consider if you want to be able to have stockholders in your business.<\/p>\r\n<p>Looking to start your own business? Use FindLaw&#8217;s <a href=\"https:\/\/www.findlaw.com\/forms\/business-formation.html\" class=\"diy-biz-txt\">DIY forms<\/a>&nbsp;to get a legal business entity set up in minutes.<\/p>\r\n<h2>Related Resources<\/h2>\r\n<ul>\r\n<li><a href=\"https:\/\/www.findlaw.com\/smallbusiness\/incorporation-and-legal-structures\/pros-and-cons-why-form-a-corporation.html\">Pros and Cons: Why Form a Corporation<\/a><\/li>\r\n<li><a href=\"https:\/\/www.findlaw.com\/smallbusiness\/incorporation-and-legal-structures\/small-business-corporation-faq.html\">Small Business Corporation FAQ<\/a><\/li>\r\n<li><a href=\"https:\/\/www.findlaw.com\/smallbusiness\/incorporation-and-legal-structures\/corporations.html\">Learn More About Corporations<\/a><\/li>\r\n<\/ul>\r\n<div class=\"was-this-helpful\">\n    <div\n            class=\"was-this-helpful__question-container\"\n            aria-labelledby=\"was-this-helpful__question\"\n            role=\"group\"\n    >\n        <span\n                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fl-text-bold\">No<\/span>\n            <i class=\"was-this-helpful__button-icon\">\n                <svg width=\"22\" height=\"22\" viewBox=\"0 0 22 22\" fill=\"none\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\">\n                    <g id=\"thumbs-down\" clip-path=\"url(#clip0_604_3423)\">\n                        <path id=\"Vector\"\n                              d=\"M16 0.999995H18.67C19.236 0.989986 19.7859 1.18813 20.2154 1.55681C20.645 1.9255 20.9242 2.43905 21 3V10C20.9242 10.5609 20.645 11.0745 20.2154 11.4432C19.7859 11.8119 19.236 12.01 18.67 12H16M9.00003 14V18C9.00003 18.7956 9.3161 19.5587 9.87871 20.1213C10.4413 20.6839 11.2044 21 12 21L16 12V0.999995H4.72003C4.2377 0.994543 3.76965 1.16359 3.40212 1.47599C3.0346 1.78839 2.79235 2.22309 2.72003 2.7L1.34003 11.7C1.29652 11.9866 1.31586 12.2793 1.39669 12.5577C1.47753 12.8362 1.61793 13.0937 1.80817 13.3125C1.99842 13.5313 2.23395 13.7061 2.49846 13.8248C2.76297 13.9435 3.05012 14.0033 3.34003 14H9.00003Z\"\n                   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