Filing as a corporation means that a business is owned by stockholders, or shareholders.
Stockholders and shareholders are people who own a part of a business that issues shares as a corporation by purchasing the shares issued.
These types of people are called shareholders. Businesses that are corporations have to have their articles approved by the state.
A corporation is not defined by its owners–this is what makes this filing status different from a proprietorship or a partnership.
Corporations are also different from proprietorships and partnerships because if a corporation cannot pay its debts, lenders cannot take the owners’ personal assets or the businesses cash to help satisfy the business’s obligations. If a corporation goes bankrupt, lenders cannot take the personal assets of the stockholders either.
When filing as a business you have the option of filing as an S Corp or a C Corp, each has different filing advantages.
Reference:
Charles T. Horngren, Walter T. Harrison, Jr., Linda Smith Bamber, 2005, Accounting I&II, Pearson, Chap. 1, Page 8
