CH11notes - ACCTG 211 EXAM 2 REV IEW CH 11 Why the...

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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 owners 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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CH11notes - ACCTG 211 EXAM 2 REV IEW CH 11 Why the...

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