The word Corporation is used to refer to a business structure. It is a distinct legal entity that can own property, hire employees, and raise capital by selling shares of stock to investors. This type of business structure provides liability protections for owners and allows them to organize a company for profit or nonprofit purposes. The incorporation process usually includes filing articles of incorporation with the state, obtaining an employer identification number (EIN), and establishing corporate bylaws. A corporation must also meet certain legal obligations to operate legally, including filing taxes and reporting financial information.
There are many different types of corporations, each with their own advantages and disadvantages. The most common include C corporations, S corporations, and limited liability companies. Each has its own set of requirements, which can vary by country and industry. A key consideration is whether to choose a public or private corporation, as the latter has stricter compliance and reporting requirements.
A longstanding strand of thought has held that a corporation’s purpose is to maximize profits for its shareholders. This view emerged from economic theory and was reinforced by the court case Dodge v Ford Motor Co in 1919. Since then, it has become a dominant paradigm in both popular culture and academic discourse, with the result that corporate boards are rarely expected to take into account non-shareholder interests or concerns.
A more practical interpretation of corporate purpose focuses on the corporation’s function as a signaling device and tool for those who interact with it. Employees want to contribute capital in exchange for a fair share of profits, customers want low-cost and high-quality products, creditors require repayment of loans, and society as a whole wants corporations to respect the planet’s natural resources.