What is a corporation?

What do Apple, Kroger, and Ford all have in common? Besides being some of the world’s largest companies and leaders in their respective industries, these three companies are also corporations!

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Corporations are legal business entities that are owned by a group of people called shareholders. Many of the companies we engage with daily are structured as corporations.

Whenever you buy shares of a company on the stock market, you become a shareholder of the company, meaning you own a small piece of it. Corporations are a popular business structure because many investors can own the company and contribute capital.

While corporations are owned by shareholders, they are governed by a board of directors. A board of directors is generally comprised of around six members who represent shareholders in major company decisions. Corporations also have an executive leadership team, usually consisting of a CEO and department heads, that is responsible for leading the company on a day-to-day basis.

Corporations are also unique in that they are subject to double taxation. This means that the company’s profits are taxed at the federal level and any dividends paid out are also taxed at the federal level.

Corporations are generally used for large companies that have a desire to raise capital from many investors.