A corporation is considered to have separate “legal personality” from the people that own it—the shareholders. This means that a corporation has the ability to enter into and enforce contracts. Additionally, a corporation can also accrue debt and own assets. As a separate legal entity, if any creditors attempt to enforce a debt against a corporation, then they can only pursue what the corporation owns in assets. An individual shareholder is only liable up to the amount that he or she invested into the corporation.
To maximize the protection that a corporation provides, it is important that shareholders do not mingle personal assets with corporation assets. The line between personal dealings and corporate business should be stringently maintained.
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