Corporation

Discipline: Economics

Corporation is a business that is treated by law as a separate legal entity from its shareholders. In other words, although its identity is created artificially, the corporation can act in the markets as a real person, meaning it can buy or sell goods or properties, can generate profits, or even go bankrupt.

The ownership of a corporation is represented by the shares which can be held by individuals or other corporations.

Corporations have their advantages and disadvantages. They can generate significant amounts of financial investment by issuing stocks. The liability of those shareholders is limited only to the value of their shares. Even if the corporation goes bankrupt, the shareholders cannot be held responsible for any debts that the value of their shares cannot cover.

Since corporations have a separate legal entity, they pay taxes like individuals. Therefore, when shareholders are paid dividends, they must pay income taxes for that revenue. This is peculiar to corporations, and is called double taxation.

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