Private Corporation: A business that is a legal entity created by the state whose assets and liabilities are separate from its owners. While there are also public corporations -- who stock (and ownership) are traded on a public stock exchange -- most small businesses are (or at least start as) private corporations. A private corporation is owned by a small group of people who are typically involved in managing the business. Forming a corporation requires developing a legal document called the "Articles of Incorporation" and submitting them to the state in which the corporation wishes to reside. Advantages of a corporation include limited liability -- an owner (stockholder) can only lose up to the amount s/he invested