Corporation

A legal entity separate from its owners, generally providing shareholders limited liability. Formation, governance and tax treatment depend on the jurisdiction and entity’s status.

Corporation in practice

Hypothetical: a U.S. startup incorporates and issues shares to investors. Shareholders generally do not become personally liable for corporate debts solely by holding shares, but personal guarantees, misconduct and other legal exceptions can create liability.

Source: IRS: S-corporation pass-through treatment and exceptions.

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