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• A corporation is a separate legal entity which can enter into contracts, acquire assets, take on debt, have checking accounts, sue and be sued, and survive beyond the death of its founders or owners
• Shareholders as the owners of a corporation are generally personally liable for the debts and liabilities of the corporation only to the extent of their capital contribution
• Since it is a business entity separate and apart from an owner's personal interests, both your family and your business are protected. Personal credit ratings and legal proceedings against individual owners do not adversely affect the health of the business. Likewise, as an owner, your personal assets and interests are generally shielded from claims arising out of the conduct of the business.
• Shareholders receive profits from their ownership interest through dividends, redemption of shares, or the sale of shares. A drawback of this type of organization is that the profits of a regular corporation (C Corporation) are taxed twice; once at the corporate level and again when profits are distributed to their shareholders. 
• This entity is distinguished from S Corporations which are governed by Subchapter S of the Internal Revenue Code and allow for pass-through taxation where the firm's income is taxed only once at the shareholder level
• Both state and local agencies in Arizona may require that your firm obtain a license or pay a fee to operate in the state. Please check with the appropriate/regulating agency to make sure your business is complying with the requirements of your particular profession.
• Read below to find out more
• Other services are available, including corporate kits starting at $88 

Management and Control: This is the most common corporate structure. It readily communicates prestige and credibility to customers, suppliers, and business associates. By giving the business it own identity, separate from its founder(s), a corporation has the flexibility and added credibility to grow its own image and prestige beyond that of its founders or managers.
Shareholders are the owners of the corporation. Unlike other entities where the actions of one owner obligate all the owners, a corporate shareholder cannot bind other owners of the firm by their actions solely as a shareholder. The shareholders of the corporation elect the corporate directors and ratify the bylaws which set forth the management procedures of the corporation. The shareholders of the corporation meet at least once a year, to elect a board of directors. The directors are responsible for managing the business and affairs of the corporation, setting corporate policy, choosing and supervising corporate officers, declaring dividends, and recommending fundamental changes. Usually, the directors must be elected by enough of the shareholders to represent a simple majority of the outstanding shares, although a higher vote requirement can be required. Thus, those who hold and control a majority of the shares have ultimate control over the corporation. Corporate officers are responsible for managing the day to day affairs of the corporation. The roles and duties of directors and officers are often scrutinized using highly developed standards of performance.
This is the most common corporate structure. The corporate management style is very flexible. Usually, the larger a corporation is, the more control rests in the hands of top management. At the other end of the spectrum, closely held companies are often actively managed by its shareholders.
A disadvantage of the corporate form of business is the observance of corporate formalities, such as creating a board of directors, having annual shareholder meetings, and adhering to state and federal reporting standards.

Limited Personal Liability: In today's business environment it is more important than ever to protect yourself and your personal assets from liability by incorporating your business as a legal entity separate and apart from your personal affairs. Without limited liability offered by the corporate structure, our home, cars, boat, savings, and investments could all be at risk and used to satisfy any lawsuits, debt or liability incurred by the business. By separating personal liability from that of your business, you can limit the impact that business credit worthiness and lawsuits have over all aspects of your personal life. In most circumstances because a corporation is a separate legal entity, the shareholders of a Corporation are personally liable for the debts and liabilities of the Corporation only to the extent of the value of their shares. As stated above, a corporate shareholder cannot bind other owners of the firm by their actions solely as a shareholder. Limited liability has the effect of protecting personal assets from claims brought against the company and vice versa. Forming a corporation or limited liability company can provide the protection needed to give you peace of mind and make your business even more successful and profitable. In addition, limited liability allows a corporation to issue debt as a source of funding. A corporation's debt will have its own credit rating which relates to the operation and administration of the business separate but is separate and apart from the personal liability issues of shareholders.

Distributions: Corporate earnings remain within the company until they are paid out. Profits are distributed to shareholders via dividends, redemption of shares, or the repurchase of shares by the corporation. Dividends are declared at the discretion of directors.

Taxation: The profits of a regular corporation (C Corporation) are subject to double taxation. In effect, earnings are taxed twice; once at the corporate level and again when profits are distributed as dividends to their shareholders. If a corporation meets specific IRS requirements, a corporation can file for Subchapter S Corporation status. This allows owners of an S Corporation to elect to be taxed only at the personal level, thus avoiding tax at the corporate level. The IRS requirements for electing S Corporation status are listed below under S Corporation.

Transferability of ownership: Corporate organization provides the greatest flexibility for the transfer of ownership. Shares of the business can be easily transferred, without significant adverse effects to ongoing operations. The firm can have an unlimited number of shareholders, and can also raise capital by issuing corporate bonds. By creating an entity separate from its owners, the business achieves a level of viability and continuation which lasts beyond the involvement of its founders, managers, directors, and specific shareholders.
Since transferability is less of an issue for corporations than for other types of business, it is easier to attract capital financing. Investing in or financing a business which stands on its own can be more appealing to investors and creditors than financing a business which has diminished transferability of ownership and credit and tax profiles which are based on the owners, not the business.
Since shares can be easily transferred, they can be used as rewards in employee incentive plans. By letting workers become owners, employees are encouraged to focus their efforts toward helping the firm achieve its long-term financial goals, instead of just working to meet short-term employee performance goals. This energizes people important to the firm's success to focus on share value and thereby increase the benefit to all shareholders. And by using an asset which the company or shareholders already own, the company can increase rewards to workers without increasing cash expenditures or employee payroll.
Also, a corporation can choose to have an unlimited life span. This allows shareholders to retain independent control of their ownership interests beyond the duration available for any other type of business interests.
Limits on the transferability of shares may include restrictive rights on ownership interests, such as right of first refusal, options, and buy-sell agreements. Corporations can also issue more than one class of stock if they want to offer differing interests in voting rights, distribution rights, and liquidation preferences.

Formation: Corporations are created in accordance with state statutes & procedures. Incorporators file the articles of incorporation with the appropriate state agency. The requirements of the articles of incorporation are determined by state statutes. States require that all new business corporations must name at least two corporate officers, a President and a Secretary. However, one person can hold a director position and all officer positions. See the applicable statute of the state in which you want to incorporate for specific requirements.
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Still have questions? Go to How does one form of business compare to another, glossary of business terms, or contact us.

Disclaimer - Not Providing Legal Services - Proactive Management, Inc. presents the material on this site as general information only. It is not offered as and does not constitute legal advice or legal opinion and should not serve as a substitute for advice from an attorney or accountant familiar with the facts of your specific situation. We provide business formation services. We are not a law firm and do not provide legal or tax advice or services. We make no warranty, express or implied, concerning the accuracy or reliability of the content at this site or at other sites to which we link.