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corporation

corporation definition - legal

An entity, usually a business, created by a legislative act or by individuals who have agreed upon and filed articles of incorporation with the state government. Ownership in the corporation is typically represented by shares of stock. Furthermore, a corporation is legally recognized as an artificial person whose existence is separate and distinct from that of its shareholders who are not personally responsible for the corporationÂ’s acts and debts. As an artificial person, a corporation has the power to acquire, own, and convey property, to sue and be sued, and such other powers of a natural person that the law may confer upon it. Abbreviated corp. See charter, corporate, and seal.

brother-sister corporation

See sister corporations.

C corporation

A corporation that pays corporate income taxes on its income rather than having its profits taxed as the personal income of its shareholders. Any corporation that is not a S corporation is, by default, a C corporation. Also called subchapter C corporation. See also S corporation.

close corporation

A corporation owned by a single individual or a small group of individuals, often all personally involved in the corporationÂ’s business or related to another, who frequently conduct the corporationÂ’s business without such formalities as annual shareholder meetings, and whose share of stocks cannot be sold to anyone outside the group without the prior permission of the other shareholders. The rights and privileges of such corporations vary state to state. Also called closed corporation, closely held corporation, or privately held corporation. See also publicly held corporation.

domestic corporation

A corporation whose articles of incorporation have been filed in a particular state. (The corporation is a domestic corporation of that state.) See also foreign corporation.
For federal income tax purposes, a corporation whose articles of incorporation have been filed in the United States.

dummy corporation

A corporation whose sole purpose is to conceal the ownersÂ’ identities and to protect them from personal liability.

foreign corporation

A corporation whose articles of incorporation have been filed in another state or country. (A corporation whose articles of incorporation have been filed in one state or country is a foreign corporation in every other state or country.) See also domestic corporation.

municipal corporation

A political entity, such as a county, city, town, village, or school district, that is created by and derives its limited powers of self-government (including the ability to enter contracts and to sue and be sued) from the state legislature. See also immunity.

nonprofit corporation

A corporation organized for a chartable, cultural, educational, religious, or some other purpose other than making a profit or distributing its income to its shareholders, officers, or others similarly affiliated with it. Usually, such corporations are given special treatment under state and federal tax laws. Also called not-for-profit corporation.

nonstock corporation

A corporation in which ownership is conferred by a membership charter or agreement that governs the ownersÂ’ rights and liabilities rather than by the ownership of shares of stock. For example, mutual savings banks and fraternal organizations are usually nonstock corporations.

parent corporation

Same as parent company. See company.

private corporation

A corporation created and owned by private individuals for a nongovernmental, usually business or nonprofit, purpose. See also public corporation.

professional corporation

A corporation owned by a small group of individuals who practice a common occupation that requires a professional license (such are accounting, architecture, law, or medicine). Such a corporation has the same, but not all, of the characteristics of a private corporation. Abbreviated P.C. Also called P.A. or professional association.

public corporation

A corporation created by a state or the federal government and, while often financially independent of the government, engages as a government agency in activities that benefit the general public. A publicly appointed board of directors manages such a corporation. See also private corporation.
See publicly held corporation.

publicly held corporation

A corporation whose shares of stock are sold to, freely traded amongst, and owned by a diverse group of shareholders who are members of the general public. See also close corporation.

S corporation

A corporation with a small number of shareholders that has elected, pursuant to Subchapter S of the Internal Revenue Code, to have its income treated as personal income to its shareholders for income tax purposes rather than have the corporation pay the normal corporate income taxes on the income. Also called subchapter S corporation. See also C corporation.

shell corporation

A corporation that has no business or ongoing activity (and sometimes no substantial assets) of its own and is typically used to conceal another corporationÂ’s business activities.

sister corporations

Two or more corporations that are subsidiaries of the same parent company. Also called brother-sister corporations. See also affiliate and company.

subsidiary corporation

A corporation in which a parent company owns enough shares to control its activities and the selection of its officers and directors. Also called a subsidiary.