Final answer:
The document filed with a state government to establish a corporation is known as the articles of incorporation. It allows for limited liability for the shareholders and is essential for the formation of a corporation and attracting investment.
Step-by-step explanation:
In the context of business ownership, the document filed with a state government to establish the existence of a new corporation is referred to as the articles of incorporation. This legal document includes information such as the corporation's name, corporate structure, and the type and amount of stock to be issued, if any. Filing the articles of incorporation is a critical step in forming a corporation and is required by state law.
Corporations allow individuals to purchase stock, which is a certificate granting partial ownership of a company and to sell bonds as a form of raising capital. One of the key advantages of a corporation is limiting the liability of the owners. Unlike sole proprietorships, where personal assets could be at risk, corporate shareholders are not personally liable for the corporation's debts or legal issues; they can only lose their investment in the company.
Incorporation offers entrepreneurs the ability to protect their personal assets while gaining the ability to raise capital from investors who are assured that they are not liable beyond their investment. This mechanism has facilitated the growth of industries and businesses by providing a safe environment for investments and the pooling of resources and expertise.