Corporations are described as corporate issuers because the external financing that they require to grow their operations is obtained by issuing debt and equity securities in capital markets. The key features of this organizational structure provide companies with the greatest ability to raise capital.

Legal Identity

A corporation is founded by filing articles of incorporation with the relevant regulatory authority. From a legal perspective, a corporation is a separate entity from its owners and it has the right to, for example, enter contracts, borrow money, hire employees, and make investments. Corporations are also responsible for paying taxes and complying with all relevant laws and regulations.

Owner-Manager Separation

A corporation is owned by shareholders and operated by professional managers. Shareholders elect a board of directors to represent their interests and oversee management's activities. Beyond voting for directors, shareholders are largely separated from the company's operations. This separation allows investors to own shares in a diverse portfolio of companies while leaving managerial decisions to specialists. This separation of the ownership and management roles also allows corporations to raise capital from a broader pool of investors.

While shareholders have limited involvement in the company's operations, they do possess the ability to change operational control through their voting rights. However, not all classes of shares necessarily have equal voting rights. Unlike limited partners, corporate shareholders can vote to replace a poorly performing management team. This mechanism helps to keep managers motivated to act in the interests of shareholders, but good governance policies are still necessary to prevent and mitigate conflicts of interest that can emerge.

Owner/Shareholder Liability

Corporate equity ownership confers a residual claim to a company's assets in excess of its liabilities. Companies are not required to repay equity capital in the same way that they are required to repay their debt. However, shareholders have limited liability that protects them from losing more than the value of their investment.

Recall that, in a limited partnership structure, the general partner has risk unlimited exposure. However, it is possible to designate a publicly traded limited liability corporation as an LLP's general partner. This arrangement is popular because it allows the fund to raise capital from investors while limiting their liability. While the corporation has unlimited liability in its capacity as general partner, its cannot lose more than the value of their investment. An additional benefit is that, by owning a significant (although not necessarily a majority) stake in the GP, founders can effectively control a partnership while limiting their liability.

Taxation

In most countries, corporations are taxed directly on their profits and any remaining funds are available to be distributed to shareholders as dividends. Governments engage in double taxation to the extent that they tax shareholders on the dividend income they have received from a company's after-tax profits.

External Financing

Because equity ownership requires only the willingness and ability to invest, companies can access a wide pool of potential investors. Corporate investors are rarely experts in the operations of the companies that they own. Potential capital providers for corporate equity issuers include individuals, institutions, family offices, governments, and other corporations. Corporations may also raise capital by issuing short-term and long-term debt securities.

A company's financial balance sheet shows that a company's assets must be financed with either equity capital or fixed debt obligations.