Business owned by a group of people

What is a corporation?

A corporation is a business owned by a group of people and authorized by the state in which it is located to act as though it were a single person, separate from it owners.

How do you become a corporation?

In order to become a corporation, you must obtain a charter (an official document through which a state grants the power to operate as a corporation).

3 step process to become a corporation...

  1. Make a series of management decisions about how it will be organized.
  2. Prepare legal forms and send to state offices that handle such matters.
  3. State will review the incorporation papers and issue a charter, if approved.

What can a corportation do?

Closed V.S. Open Corporations

Closed: One hat does not offer its shares of stock for public sale. In most states, this type of corporation does not need to make its financial activities known to the public.

Open: One that offers it shares of stock for public sale.


People who are the top executives who are hired to manage a business. The board of directors appoints them.

Usually consist of...

  • President
  • Vice President (depending on how large the business is)
  • Secretary
  • Treasurer


Someone who buys a share or shares of a stock is considered a stockholder, or shareholder. Therefore, several people can own a corporation.

Stockholders have the right to...

  • transfer ownership to others

  • vote for members on special matters brought before the stockholders

  • receive dividends

  • buy new shares of stock

  • share the net proceeds

Board of Directors

The ruling body of the corporation. The board members are elected by the stockholders. Have management oversight responsibilities to develop plans and policies to guide the corporation as well as appoint officers to carry out the plans.

Preparing the certificate of incorporation

Naming the business:A business is usually required by law to have a name that clearly indicates that a corporation has been formed. (ex. York, Burton, and Chan, Inc.)

Stating the purpose of the business:A certificate of incorporation requires a corporation to describe its purpose clearly.

Paying incorporation costs: A new corporation must pay an organization tax, based on the amount of its capital stock.

Organization Chart for a Corporation

Stockholders → Board of Directors →

President→ Vice President & Secretary & Treasurer