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A corporation is considered a legal entity that is separate from those who own it. Under the law, corporations possess many of the same rights and responsibilities as individuals. They can enter contracts, loan, and borrow money, sue, and be sued, hire employees, own assets, pay taxes and more.

The precise legal definition of a corporation differs, but the corporation's most important characteristic is always limited liability. This means that shareholders may take part in the profits through dividends and stock appreciation but are not personally liable for the company's debts. A corporation is created when it is incorporated by a group of shareholders who share ownership of the corporation. These shareholders are represented by their holding of stock shares and pursue a common goal. Most corporations have a goal of returning a profit for their shareholders however, some corporations, such as charities are not-for-profit.

In any case, their shareholders do not accept responsibility for it beyond the potential loss of their investment in it. A private corporation may have a single shareholder or several. Publicly traded corporations have thousands of shareholders. In the U.S., corporations are created under the laws of the individual states and are regulated by state laws. Public corporations are regulated by federal law, primarily via the Securities and Exchange Commission.

Most states require the owners to file articles of incorporation with the state and then issue stock to the company's shareholders. The shareholders are required to elect the board of directors in an annual meeting. The process of turning a private corporation into a public corporation is far more complex, as it falls under federal laws requiring full and public disclosure of financial information to potential shareholders and to the government.

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