A corporation is an independent legal entity and is separated from the people who own it. This entity possesses many legal rights that individuals have, including hiring employees, opening a bank account and entering into contracts with other businesses. A board of directors, typically elected and appointed by the shareholders of the corporation, manages the corporation’s day-to-day operations.
Shareholders of a corporation receive financial gain when the corporation makes money. However, since a corporation is considered a legal person”, shareholders have limited liability. For example, when a corporation goes bankrupt, its shareholders aren’t responsible for its debts and aren’t required to pay the creditors with their own money.
A corporation can be liquidated to terminate its legal life. During liquidation, an appointed liquidator sells the assets of the corporation and uses the proceeds to pay off any outstanding debts before distributing the remaining assets to shareholders.