corporation

A legally-constituted joint enterprise, usually for the conduct of business and for tax advantages. Types of corporations include publicly-traded corporations, which sell stock to the public to raise capital, and privately-held corporations. Corporations are legal entities distinct from the individuals who manage their affairs or from the owners of their stock.

The legal status of a corporation as a unique entity gives the owners and managers freedom from liability for the corporation's actions. The corporation can be sued and can sue, and it can make contracts. This limitation of liability is essential for growth and development, since large amounts of capital must be raised from many sources. The affairs of the corporation are governed by bylaws and managed by a board of directors. Laws vary from state to state and nation to nation as to how many directors are required and whether they must be stockholders. The board acts on behalf of the stockholders and can be held accountable for failure to abide by the bylaws or for faulty judgement that results in losses. The development of multinational corporations (enterprises that operate in a number of countries) has been a subject of increasing controversy since they operate only in their own interest, often at odds with government policies in those countries. They also can cause disruptions in domestic economies as they shift facilities and marketing operations in search of the greatest advantage.