chapter1 - Chapter 1 The Corporation 1-1. A corporation is...

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Chapter 1 The Corporation 1-1. A corporation is a legal entity separate from its owners. This means ownership shares in the corporation can be freely traded. None of the other organizational forms share this characteristic. 1-2. Owners’ liability is limited to the amount they invested in the firm. Stockholders are not responsible for any encumbrances of the firm; in particular, they cannot be required to pay back any debts the incurred by the firm. 1-3. Corporations and limited liability companies. Limited partnerships provide limited liability for the limited partners, but not for the general partners. 1-4. Advantages: Limited liability, liquidity, infinite life Disadvantages: Double taxation, separation of ownership and control 1-5. C corporations much pay corporate income taxes; S corporations do not pay corporate taxes but must pass through the income to shareholders to whom it is taxable. S corporations are also limited to 75 shareholders and cannot have corporate or foreign stockholders.
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This note was uploaded on 12/28/2009 for the course FEWEB CORPFIN taught by Professor Dorsman during the Spring '09 term at Vrije Universiteit Amsterdam.

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chapter1 - Chapter 1 The Corporation 1-1. A corporation is...

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