A corporation is treated as a unique entity with limited liability and perpetual existence that is owned by shareholders.
Of note regarding corporations:
- You must file paperwork with the state.
- You must prepare bylaws that govern the operation of the corporation.
- The corporation must observe certain corporate formalities.
A corporation is taxed when the corporation earns profits, and the dividends distributed to shareholders are also taxed. If the corporation meets certain requirements, it can elect to be treated as an "S Corporation" such that income and losses pass through to the shareholders.