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Unformatted text preview: Chapter 11 Corporate Reporting and Analysis Characteristics of Corporations- Advantages of Corporations Separate legal Entity • A corporation conducts its affairs with the same rights, duties and responsibilities of a person. • It takes actions through its agents, who are its officers and managers Limited Liability of Stockholders • Stockholders are neither liable for corporate acts nor corporate debt Transferable ownership rights • The transfer of shares from one stockholder to another usually has no effect on the corporation or its operations except when this causes a change in the directors who control or manage the corporations Continuous Life • A corporation’s life continues indefinitely because it is not tied to the physical lives of its owners Lack of Mutual Agency for Stockholders • A corporation acts through its agents, who are its officers and managers. Stock holders do not have the power to bind the corporation to contracts Ease of capital accumulation • Buying stock is attractive to investors because o Stockholders are not liable for the corporation’s acts and debts o Stocks are usually transferred easily o The life of the corporation is unlimited o Stockholders are not corporate agents- Disadvantag es of Corporations Govern m ent Regulation • A corporation must meet requirements of a state’s incorporation laws, whic subject the corporation to state regulation and control. Proprietorships and partnerships avoid many of these regulations and governmental reports. Corporate taxation • Corporations are subject to the same property and payroll taxes as proprietorships and partnerships plus additional taxes Corporate Organization and Management- Incorporation A corporation is created by obtaining a charter from a state government. • A charter application usually must be signed by the prospective stockholde called incorporators or promoters and then filed with the proper state offici • Investors then purchase the corporation’s stock meet as stockholders and elect a board of directors- Organization Expenses The costs to organize a corporation • Corporation records (debits) these costs to an expense account called organization expenses- Management of a Corporation Each stockholder usually has one vote for each share of stock owned A corporation usually holds a stockholder meeting at least once a year to elect directors and transact business as its bylaws require Stockholders who do not attend stockholder’s meeting must have an opportun to delegate their voting rights to an agent by signing a proxy, a document that gives a designated agent the right to vote the stock Stockholders of Corporations- Rights of stockholders When investors buy stock, they acquire all specific rights the holders by the law...
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- Spring '09
- Biology, Dividend, com mon stock