What is a corporation? Definition and meaning

A corporation is a company, a firm, a common form of business organization which is chartered by a state and is legally seen as a separate entity from its owners. However, the word corporation does not always have the same meaning as a company. If you own a small company that repairs lawn mowers called Lawn Mower Repairs Ltd., which employs four workers, and occupies premises totaling 150 square feet, you cannot say that it is a corporation.

Corporations are usually thought of as large entities that generally do several different businesses and typically have some subsidiary companies – this is not always the case. Corporations are firms in the sense that they are in business to make a profit.

While the strict definition of a corporation can vary from country to country, most people globally would agree that a company can be any business, whether a corporation or a corner shop with limited liability. In fact, in some countries even partnerships are classed as companies. Corporations, on the other hand, mostly have a board of directors whose members are chosen by voting shareholders.

What is a corporationCorporations have been around for thousands of years in many parts of the world.

Corporation vs. Company in the US and UK

The website translegal.com explains that the meanings of corporation and company in the United States and United Kingdom differ slightly.

In the US, a corporation is a business entity in which the liability of its owners – the shareholders – for the corporation’s liabilities are limited to the value of the stocks (shares) they hold.



In the UK, corporation can also refer to a state company, as in BBC – British Broadcasting Corporation.

The Financial Time’s ft.com/lexicon defines a corporation as:

“A large company or group of companies acting together as a single organization. In Britain, a large company or a public organization.”

Falun MineThe Falun Mine in Sweden became a proper corporation by Royal Charter in 1347. Its structure was very advanced for its time. Miners owned shares in the operation, proportional to their ownership of copper smelters. The company was a precursor to today’s joint stock companies. (Image: Wikipedia)

Many types of corporations

There are several types of corporations, however, they are generally divided by the law of the jurisdiction where they are chartered into two types:

1. Whether they are for profit.

2. Whether they are not-for-profit.



Where a nation’s law distinguishes corporations by ability to issue stocks, corporations that are allowed to do so are called stock corporations – ownership is through shares, and owners of shares are referred to as shareholders or stockholders.

Corporations chartered in parts of the world where they are distinguished by profit or not-for-profit categories are referred to simply as not-for-profit or for profit.

Corporations have rights

Even though corporations are not people, as far as the law is concerned they are legal entities just like human individuals, and have many of the same rights and responsibilities that you and I have.

Corporations can be responsible for human rights violations and exercise human rights issues against the state and real individuals.

A corporation can be dissolved either by order of the court, voluntary action on the part of the stockholders, or statutory operation. Insolvency may result in a form of business (corporate) failure, when a creditor or creditors force the liquidation and dissolution of the entity under court order.

Companies corporationsMany famous companies have the word ‘corporation’ or ‘corp.’ in their name.

History of corporations

Etymologists (they study the origins of words) say that the word ‘corporation’ originates from the Latin corpus, which means body or a body of people.

By the time of Justinian – a Byzantine (East Roman) emperor from 527 to 565 – several corporate entities under the names collegium, universitas, or corpus were recognized by Roman Law. These included the populous Romanus (the state itself), municipalities, political groups, guilds of traders or craftsmen, burial clubs, religious cults and other private associations.

These bodies had the right to make contracts, own property and other assets, loan and borrow money, receive gifts and legacies, to sue, to be sued, pay taxes, and perform legal acts through representatives. The emperor granted privileges and liberties to these private associations.

Entities which performed business activities and had legal rights existed in ancient Rome and other parts of the world, including the Maurya Empire in ancient India (322–185 BC).

Churches became incorporated in medieval Europe, as did local governments, such as the City of London Corporation and the Pope.

The point of a corporation was that it would survive longer than the lifespans of each of its members – existing forever.

The Stora Kopparberg mining community in Falun, Sweden, obtained a charter from King Magnus Eriksson in 1347 – it is the oldest commercial corporation (in the modern sense of the word) in the world that we know of.

Corporations were created by European nations to lead colonial ventures, such as the Hudson’s Bay Company, a Canadian retail business group founded in 1670, and the Dutch East India Company, which was founded in 1601 and granted a 21-year monopoly on Dutch spice trade by the Dutch government.

These chartered companies were the ancestors of the modern corporations that exist in Europe, North America, Australasia, and many other parts of the world today.

In Britain, the government created corporations under an Act of Parliament or Royal Charter with the grant of a monopoly over a specified geographical region.

The East India Company of London, established in 1600, is the best example of a corporation created under Royal Charter. Queen Elizabeth I granted the corporation the exclusive right to trade with all the nations to the east of the Cape of Good Hope, a rocky headland on the Atlantic coast of South Africa.

Some corporations in 1600 acted on their government’s behalf, bringing in substantial revenue from their exploits overseas.

Quotes using the word ‘corporation:

“Corporation: An ingenious device for obtaining profit without individual responsibility,” (Ambrose Bierce, 1842-1914) – an Amrican editorialist, journalist, short story writer, satirist and fabulist).

“In my view, a corporation is not a person. A corporation does not have First Amendment rights to spend as much money as it wants, without disclosure, on a political campaign,” (Bernie Sanders – an American politician, the junior United States Senator from Vermont since 2007)

“Now, we used to think the brain was like a computer. But now, we realize that’s not true. There’s no programming of the brain. There’s no Windows. And we think the brain is more like a large corporation. Because think of the unconscious mind. In a corporation, you have subdivisions which operate independently of the main office,” (Michio Kaku – an American theoretical physicist and popularizer of science)

“In a corporation, there can only be one guy in the end: the CEO,” (Lee Iacocca – an American former automobile-industry executive)

“You can’t build a strong corporation with a lot of committees and a board that has to be consulted every turn. You have to be able to make decisions on your own,” (Rupert Murdoch –  an Australian-born American media mogul)

“A corporation’s primary goal is to make money. Government’s primary role is to take a big chunk of that money and give it to others,” (Larry Ellison – an American businessman co-founder of Oracle Corporation)

“I used the aspects of being a woman to my advantage, but I worked for myself, not a big corporation, so I was lucky to have the freedom to behave however I liked,” (Diane von Furstenberg – a Belgian fashion designer famous for her iconic wrap dress)

Video – What is a corporation?

This Investors Trading Academy video explains in simple and easy-to-understand language what a corporation is.