The two primary classes of stock are preferred and common. Basic decisions are made by stockholders, while the board of directors sets the policies for the corporation. The individual may manage and operate the farm just as any business manager would, but does so as an employee of the corporation. Although the corporation is owned by the stockholders, the corporate structure provides a means of separating ownership from management and of protecting both parties from risks or liabilities associated with the corporation. Accordingly, unlike sole proprietorships or partnerships, stockholders are not personally liable for actions of the corporation.
Liability is limited to the individual investments of the stockholders.
A corporation is the best organizational structure as far as protection of personal assets is concerned. A corporation, like a partnership, provides a means by which related or unrelated individuals may combine their funds and operate a business. However, in the case of a corporation, the organization is considerably more structured and legally binding. A corporation can be organized to exist perpetually or for a term of years. It is legally created and can only be terminated through the legal process.