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ABA Family Legal Guide

Forming and Operating a Small Business

Types of Business Organizations

Corporations

What makes corporations different from sole proprietorships or partnerships?

The basic attributes of a corporation include

  • limited liability of corporate directors, officers, and managers;
  • perpetual existence (a life independent of the life of the directors, the officers, the management, etc.);
  • free transferability of shares;
  • the ability to own property in the corporation's name;
  • the ability to bring suit and be sued in the corporate name; and
  • status as a separate taxpayer.

    All but the last of these are good things, and even status as a separate taxpayer can be a good thing in certain circumstances. This helps explain why the corporate form is popular. However, the tripartite system of corporate management--consisting of shareholders, directors, and officers--can be cumbersome, especially for a small business. That helps explain why corporations are not the best form for all businesses.

    • American Bar Association Family Legal Guide
    Copyright © 2004 American Bar Association
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