The corporation is the most common form of business entity in the United States. A corporation is formed when individuals complete certain formali-ties, including the filing of documents known as articles of incorporation and the payment of fees to the proper authority. The secretary of state in most states is the official responsible for receiving the documents and filing fees from the corporations.
Traditionally, the corporate form of business was the preferred limited liability entity because the corporation exists separate from its owners and investors. The corporation, although an artificial entity, is treated like an individual in most respects. It may enter into contracts, it may sue or be sued, and it may own property. A corporation may also exist perpetually because it may continue to exist even when owners and investors change.
As an entity separate from its owners and investors, a corporation is liable for its own contracts. Owners and investors generally are only liable to the extent of the amount that these individuals invested in the corporation.
Many states base their laws governing corporations on the Model Business Corporation Act (MBCA), which was prepared by the Section of Business Law of the American Bar Association. However, most of these states have deviated from the MBCA with respect to some of the provisions. Other states have chosen not to follow the MBCA and have instead drafted their own statutes.