Most large businesses in the United States are corporations. A corporation is a legal entity, or being, owned by individual stockholders. Each stockholder has limited liability for the firm’s debts, and can lose only as much as he or she has invested. Stockholders own stocks, which represent their share of ownership in the corporation. Like a person, a corporation pays taxes, can enter into contracts, and can bring lawsuits in court. All corporations have the same basic structure. Stockholders elect a board of directors. The board makes the important decisions for the corporation. It also apppoints corporate officers who run the corporation.

     The most important advantage of the corporate structure is limiting liability. Stockholders can only lose the amount of money they have invested. Corporations can raise money by selling stock on the stock market. Corporations also borrow money by selling bonds. Bonds are certificates corporations issue, promising to repay the money they borrow with interest.

     As a corporation grows, it may decide to merge, or combine, with another company or companies. Horizontal mergers join two or more firms in the same market. For example, two automakers may decide to form a larger company. Vertical mergers join two or more firms involved in different stages of making the same good or service. For example, an automaker may merge with the company that supplies it with rubber tires. Conglomerates combine companies which produce completely unrelated goods or services. Multinational corporations (MNCs) are corporations that operate in more than one country at a time.