This allows the company, when it is doing well, to raise money easily and cheaply. A corporation is a separate, legal, business entity formed under state law. The state grants permission to the corporation to form, which is called a charter . The owner's equity of a corporation is divided into shares of stock . The corporate charter specifies how much stock the corporation can issue, or sell.
Stockholders have limited liability for corporate debts.
The most you can lose is what you have invested. A corporation has separation of ownership and management. Stockholders own the business, but a board of directors, which are elected by the stockholders, appoints corporate officers to manage the business. Management is then to maximize the firm's value for the stockholders' benefit. If that isn't enough, then the corporation pays tax on their corporate income, while the stockholders pay taxes on the cash dividends they receive from the corporation.