What is a Corporation?

According to the Entrepreneur Small Business Encyclopedia, a corporation is defined as a business operation that declares itself as a separate legal entity guided by a group of officers known as the board of directors. Having a corporate structure is perhaps the most advantageous way of starting a business because a corporation exists as a single entity. Corporations have the rights and responsibilities possessed by individual business owners like: entering into contracts, loaning and borrowing money, hiring employees, owning assets and paying taxes, and it also has the risk of being sued and suing just like an individual.


Throughout history, the concept of corporations have already been in practice. Such is practiced in the case of risky ventures like the exploration of the new world. Prior to the practice of incorporation, when one invests in a certain venture that subsequently fails, the investor faces the possibility of unlimited liability. When potential investors learned to invest fixed sums of money for succeeding ventures, they are guaranteed a portion of the profits when the venture succeeds, and they only face the risk of losing the amount of their initial investment when the venture fails.  


The principles of incorporation are the same then as it is in this time. Having a corporation allows you to have investors invest their money into your business allaying the risk of further liabilities. While more and more situations hold a lot of people liable in or current legal system, having a corporation still stands as one of the most steadfast protections we have for such liabilities, and thus the same concept is still being practiced until today.