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Unformatted text preview: ACCTG 211 EXAM 2 REV IEW – CH 11 Why the corporate form of business? Advantages • Separate Legal Entity – a corporation can buy and sell property, sue other parties, enter into contracts, hire and fire employees and be taxed • Limited Liability – its creditors can satisfy their claims only against the assets of the corporation (instead of personal property) • Ease of capital generation – greater number of potential investors for a small amount of money (many owners = easier to raise capital) • Ease of Transfer of Ownership – shares are easily transferable; do not interrupt normal business operations • Lack of Mutual Agency – stockholder enters a contract for the corporation; that corporation is not bound to it (is in partnership) • Continuous Existence – owner’s death, incapacity, withdrawal does not affect the life of a corporation • Centralized Authority and Responsibility – the board of directors represents the stockholders and delegates authority for operations to a single person(president); operating power not divided among the many owners of a business • Professional Management – ownership and management are separate; allows a corporation to hire the best talent available to manage the business Disadvantages • Government Regulation – corporations must meet the requirements of state laws; subject to greater control than other forms of business; must file many...
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This note was uploaded on 10/25/2010 for the course ACCTG 211 taught by Professor Johnston during the Spring '99 term at Penn State.
- Spring '99