1-3 First Exam Overheads - Business Entity

1-3 First Exam - PREPARER THE BUSINESS ENTITY"TO OUR SHAREHOLDERS ORGANIZATIONAL FORM PROPRIETORSHIP STARTUP(BUS LICENSE OWNERSHIP TITLE OWNERSHIP

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PREPARER – THE BUSINESS ENTITY “TO OUR SHAREHOLDERS” - ORGANIZATIONAL FORM PROPRIETORSHIP PARTNERSHIP CORPORATION 1 STARTUP ( BUS LICENSE ) Agreement Corporate charter OWNERSHIP Private Private Public or private (see below) TITLE Receipts Agreement Stock certificates OWNERSHIP / MANAGEMENT Same Shared Separate LIABILITY TO OWNERS 1 Unlimited Unlimited for at least one Limited to investment EARNINGS TAXED 2 Once at personal rates Once at personal rates Twice: at corporate and personal rates TRANSFER OF OWNERSHIP Easy to impossible Near to impossible Easy CAPITAL FORMATION Small Medium Large Partnership- don’t pay taxes but after they figure out their earnings, they split them up. Then they pay taxes. 1 partner must always have unlimited libility. Corporation- must fill out a form. Upside- limited liability. The downside is that they must pay dividends, and also pay taxes again (double taxes). LLC- limited liability corporation. TYPES OF CORPORATIONS Public (Owned by government, e.g. FDIC) Private (owned by individuals) Nonstock – (doesn’t exist; e.g., church) Stock (exists) Closed (can’t buy) e.g. Professional (LLC) or Subchapter S Open (can buy) – e.g. listed (NYSE) or unlisted (OTC) 1. Hybrids - Limited liability corporations beginning to emerge 2. If profit oriented; if not, exempt from taxation WILLIAM WELLS 1989-2007 1 5/11/2009
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PREPARER – THE BUSINESS ENTITY - BOARD OF DIRECTORS ( look at the big picture. They take leadership - the process of getting things done through other people. People who excel at leadership are able to articulate a strong vision, marshal the resources at their disposal, and persuade and enable others to help them achieve a shared goal.) (they set the strategic direction of the corporation. Ex- Costco started off in the west coast, branched out to the east, then Europe and asia. This was a strategic decision that the board of directors made.) (They don’t run the company, the senior management does.) Majority must be “independent” Board member or family member not employed within 3 years Nonboard related-compensation caps ($60K-NASDAQ; $100k - NYSE Elected by common stockholders Organize according to interest areas
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This note was uploaded on 04/29/2008 for the course ACCTG 215 taught by Professor Wells during the Spring '08 term at University of Washington.

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1-3 First Exam - PREPARER THE BUSINESS ENTITY"TO OUR SHAREHOLDERS ORGANIZATIONAL FORM PROPRIETORSHIP STARTUP(BUS LICENSE OWNERSHIP TITLE OWNERSHIP

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