 Hello in this lecture we will define a corporation according to fundamental accounting principles while the 22nd edition the definition of corporation is Business that is a separate legal entity under state or federal laws with owners called shareholders or Stockholders so when we're thinking about corporations We're thinking about a legal entity that is going to be separate from the owners for example We have the corporation you can think of it basically as just a piece of paper a corporation And it is legally separate then from the owners meaning the corporation is a separate legal entity This was a huge invention. This is a great invention. What does the corporation do for us in being a separate legal entity? It allows those assets to be generated within the corporation have some Liability protection for the stockholders So if the corporation was to be sued for example The idea would then be that we are going after the assets of the corporation and the stockholders or shareholders The actual owners have some personal protection from their personal assets that allows More owners to be able to invest capital in Corporations with a bit more security a lot more security In their investments one of the problems with the corporation However is that due to the fact that it's an owner and has its own legal rights to ownership It also has responsibilities related to that one being the payment of income taxes So the corporate income tax typically is going to be taxed on the corporate level and then that tax is if a Distribution made in the form of dividends then that could be taxed as well on the shareholder level that's one of the problems with a Corporation that could result in the double taxation and more complication in terms of the paperwork for the corporation Also note that this idea of separating the books in terms of the business From the owner is a fundamental accounting concept. We want to separate the business from the owner Even if we're a sole proprietor however, when we think about a corporation, it's actually a separate legal entity That's different from the idea that we're going to keep the books separate Which we will do no matter what type of entity we have set up We want to keep the accounting separate in terms of the organization to the owners the corporation being a separate legal entity from the owners