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Corporations

Published on Jan 14, 2016

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1.

Corporations

Mr. Melkonian
2.

entity which the law considers separate

distinct from owners
3.

capital divided into shares

held by shareholders
4.

Corporations must have in their name...

  • Limited (Ltd.)
  • Incorporated (Inc. or Corp.)
5.

very common due to limited liability

done so risky/costly ventures can take place
6.

i want to start a supermarket chain

Photo by mdid
7.

i can divide the cost by many interested investors

they get share certificates (stock certificate)
8.

characteristics of corporations

9.

only common shareholders

have voting rights - proportionate to amount you own
10.

separate legal entity

11.

legal entity

  • buy/sell property in its own name
  • can sue or be sued in its own name
  • can enter into legal contracts in its own name
  • it must pay its own income tax
12.

shareholders responsible only up to how much they put in

limited liability
13.

government control involved

to protect share holders
14.

board of directors

decide company policy - elected by shareholders
15.

board of directors pass by-laws

pick president, vp, treasurer, etc.
16.

to own corp. have to own 51%+ of the shares

17.

ADVANTAGES

  • LIMITED LIABILITY
  • EASE OF RAISING CAPITAL
  • CONTINUITY (IF YOU DIE, IT'S COOL)
  • EASE OF TRANSFERRING OWNERSHIP
  • NO MUTUAL AGENCY (RANDOMS CAN'T DO WILD CONTRACTS)
18.

TAXES!

THEY GET BIG TAX BREAKS WHICH IS SIGNIFICANT
19.

DISADVANTAGES

  • LACK OF DIRECT INFLUENCE (FEEL OF HELPLESSNESS INDIVIDUALLY)
  • GOVERNMENT REGULATION (STRICT)
  • ORGANIZATIONAL COSTS (FEES/LEGAL EXPENSES)
  • TAX CONSIDERATIONS... IF YOU'RE A BIG COMPANY WITH GOOD EARNINGS....
20.

PUBLIC CORPORATIONS

SELL SHARES TO GENERAL PUBLIC
21.

HAVE TO PUBLISH AUDITED FINANCIAL STATEMENTS

DISTRIBUTE IT ANNUALLY TO SHAREHOLDERS (QUARTERLY)
22.

PRIVATE CORPORATIONS

CAN'T HAVE MORE THAN 50 SHAREHOLDERS
23.

RAISE FUNDS PRIVATELY

CAN'T ADVERTISE SALE TO PUBLIC (SMALL-MEDIUM SIZED BUSINESS)
24.

ACCOUNTS DON'T HAVE CAPITAL OR DRAWINGS

25.

CAPITAL STOCK ACCOUNT

CAPITAL INVESTED BY SHAREHOLDERS WHEN THEY PURCHASE SHARES
26.

reTAINED EARNINGS ACCOUNT

CAPITAL THAT COMES FROM COMPANY PROFITS NOT YET BEEN PAID OUT
27.

RETAINED EARNINGS

  • NET INCOME/NET LOSS
  • DIVIDENDS
28.

DIVIDEND

AMOUNT PAID TO SHAREHOLDERS OUT OF COMPANY PROFITS
29.

DECLARING DIVIDEND

DATE, RECORD, PAYMENT

Peter Melkonian