corporation
/ kor-puh-RAY-shun /
Suppose a business needs to raise a million dollars and outlive its founders. No single owner can supply that, and unlimited personal liability would scare investors away. The solution that societies invented is to let a business become its own legal 'person' — one that can own property, sign contracts, sue and be sued, and keep going even as its owners come and go. That artificial person is a corporation.
A corporation is a business that the law treats as a separate legal entity, distinct from the people who own it. Ownership is divided into shares of stock; the shareholders own the company but generally are not personally liable for its debts beyond what they paid for their shares — this is limited liability. If the company fails owing millions, shareholders can lose their investment but not their houses. The corporation pays its own taxes, has its own accounts and equity section (split into contributed capital, like common stock, and retained earnings), and is usually run by managers overseen by a board the shareholders elect.
Corporations dominate large-scale business because limited liability and transferable shares make it easy to gather huge amounts of money from many investors and to keep operating indefinitely. The trade-offs are more cost, paperwork, and regulation, plus the famous issue of 'double taxation' in some systems: the corporation is taxed on its profit, and shareholders are taxed again on dividends. A common misconception is that shareholders 'are' the company or can spend its cash directly — they own it, but the corporation's money is the corporation's, not theirs.
An investor buys 1,000 dollars of a company's shares. If the company later collapses owing two million dollars, the most that investor can lose is the 1,000 dollars paid — creditors cannot touch the investor's personal savings. That cap on loss is limited liability, the single most important reason the corporation form exists.
Limited liability caps a shareholder's loss at what they invested, no matter how much the company owes.
Limited liability protects the owners, not the company: the corporation itself remains fully liable for its own debts. And owning shares does not let you spend the company's cash — the entity's money belongs to the entity, not to its shareholders.