noun
An entity, usually a
business, created by a legislative act or by individuals who have agreed upon
and filed articles of incorporation with the state government. Ownership in the
corporation is typically represented by shares of stock. Furthermore, a corporation
is legally recognized as an artificial person whose existence is separate and
distinct from that of its shareholders who are not personally responsible for
the corporationÂ’s acts and debts. As an artificial person, a corporation has
the power to acquire, own, and convey property, to sue and be sued, and such
other powers of a natural person that the law may confer upon it. Abbreviated corp. See
charter,
corporate, and
seal.
brother-sister corporation
See sister corporations.
C corporation
A corporation that pays corporate income taxes on its
income rather than having its profits taxed as the personal income of its
shareholders. Any corporation that is not a S corporation is, by default, a C
corporation. Also called subchapter C corporation. See also
S corporation.
close corporation
A corporation owned by a single individual or a small group
of individuals, often all personally involved in the corporationÂ’s business or
related to another, who frequently conduct the corporationÂ’s business without
such formalities as annual shareholder meetings, and whose share of stocks
cannot be sold to anyone outside the group without the prior permission of the
other shareholders. The rights and privileges of such corporations vary state
to state. Also called closed corporation, closely held corporation, or
privately held corporation. See also publicly held corporation.
domestic corporation
- A corporation whose articles of
incorporation have been filed in a particular state. (The corporation is a
domestic corporation of that state.) See also foreign corporation.
- For federal
income tax purposes, a corporation whose articles of incorporation have been
filed in the United States.
dummy corporation
A corporation whose sole purpose is to conceal the ownersÂ’
identities and to protect them from personal liability.
foreign corporation
A corporation whose articles of incorporation have been
filed in another state or country. (A corporation whose articles of
incorporation have been filed in one state or country is a foreign corporation
in every other state or country.) See also domestic corporation.
municipal corporation
A political entity, such as a county, city, town, village,
or school district, that is created by and derives its limited powers of
self-government (including the ability to enter contracts and to sue and be
sued) from the state legislature. See also
immunity.
nonprofit corporation
A corporation organized for a chartable, cultural,
educational, religious, or some other purpose other than making a profit or
distributing its income to its shareholders, officers, or others similarly
affiliated with it. Usually, such corporations are given special treatment
under state and federal tax laws. Also called not-for-profit corporation.
nonstock corporation
A corporation in which ownership is conferred by a
membership charter or agreement that governs the ownersÂ’ rights and liabilities
rather than by the ownership of shares of stock. For example, mutual savings
banks and fraternal organizations are usually nonstock corporations.
parent corporation
Same as parent company. See
company.
private corporation
A corporation created and owned by private individuals for
a nongovernmental, usually business or nonprofit, purpose. See also public
corporation.
professional corporation
A corporation owned by a small group of individuals who
practice a common occupation that requires a professional license (such are
accounting, architecture, law, or medicine). Such a corporation has the same,
but not all, of the characteristics of a private corporation. Abbreviated P.C.
Also called P.A. or professional association.
public corporation
- A corporation created by a state or
the federal government and, while often financially independent of the
government, engages as a government agency in activities that benefit the
general public. A publicly appointed board of directors manages such a corporation.
See also private
corporation.
- See publicly held corporation.
publicly held corporation
A corporation whose shares of stock are sold to,
freely traded amongst, and owned by a diverse group of shareholders who are
members of the general public. See also
close corporation.
S corporation
A corporation with a small number of shareholders that has
elected, pursuant to Subchapter S of the Internal Revenue Code, to have its
income treated as personal income to its shareholders for income tax purposes
rather than have the corporation pay the normal corporate income taxes on the
income. Also called subchapter S corporation. See also
C corporation.
shell corporation
A corporation that has no business or ongoing activity (and
sometimes no substantial assets) of its own and is typically used to conceal
another corporationÂ’s business activities.
sister corporations
Two or more corporations that are subsidiaries of the same
parent company. Also called brother-sister corporations. See also
affiliate and
company.
subsidiary corporation
A corporation in which a parent company owns enough shares
to control its activities and the selection of its officers and directors. Also
called a subsidiary.