An entity that abides by specific legal requirements that sets it apart as having a legal existence, as an entity separate and distinct from its stockholders (owners). Corporations are owned by their stockholders who have the right to share in profits and losses produced by the firm’s operation. Corporations have three distinct characteristics:
(1) Legal existence: a Corporation can (as can a person) buy, sell, own, enter into a contract, and sue people or other corporations and be sued by them. A corporation can be charitable or commit criminal offenses.
(2) Limited liability: a corporation and its stockholders have limited liability with the corporation’s creditors unless the owners give personal-guaranties.
(3) Continuity of existence: a corporation will continue to exist beyond the life spans of its stockholders and founders because ownership in a corporation (stocks) can be sold, donated or bequeathed.