Starting a Business Means Getting Organized(2/2)

The most complex kind of business organization is the corporation. Corporations are designed to have an unlimitedlifetime. Corporations can sell stock as a way to raise money. Stock represents shares of ownership in a company. Investors who buy stock can trade their shares or keep them as long as the company is in business.

A company might use some of its earnings to pay dividends as a reward to shareholders. Or it might reinvest the money into the business. If shares lose value, investors can lose all of the money they paid for their stock. But shareholders are not responsible for the debts of the corporation.

A corporation is recognized as an entity -- its own legal being, separate from its owners. A board of directors controls corporate policies. The directors appoint top company officers. The directors might or might not hold shares in the corporation.

Corporations can have a few major shareholders. Or ownership can be spread among the general public. But not all corporations are traditional businesses that sell stock. There are nonprofit groups that are also organized as corporations.