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Corporations

A corporation is more than the sum of it's shareholders. Each stockholder is an individual, and as an individual has both rights and responsibilities.

The same is true of corporations.  a corporation is an entity distinct from it's stockholders. It can sue, be sued, or even own the shares of another corporation. Corporations ('C' corporations) can also be taxed distinctly from it's stockholders but this may lead to both the corporation and the stockholders being taxed on the same income. This can be a problem or a benefit, depending on the of the circumstances of the stockholders.

In order to accommodate this problem, the IRS allows some corporations ('S' corporations) to make an election to be taxed as a small business corporation. If this election is made, the profits/losses of the corporation are passed through to the stockholders and the stockholders are taxed at individual rates on this income.

In other cases, the corporation (Not For Profit Corporations) may be engaged in a pursuit that doesn't have profit as a goal. This can be said of some philanthropic endeavors such as charities.

So why are they all thrown into one basket called corporations, you may ask? It is because they all have one very important  thing in common - they all limit the shareholders' liability for the actions of the corporation to the amount that each stockholder has invested in the corporation.

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