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Chapter 25 Outline - 38ppt

Chapter 25 Outline - 38ppt - CHAPTER 25 OUTLINE I THE...

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C HAPTER 25 O UTLINE I. THE NATURE AND CLASSIFICATION OF CORPORATIONS A. C ORPORATE P ERSONNEL Shareholders elect a board of directors, which is responsible for overall management and  hires corporate officers to run daily operations. B. T HE L IMITED L IABILITY OF S HAREHOLDERS The   key   feature   of   a   corporation   is   the   limit   of   its   owners’   liability,   for   corporate  obligations, to the amounts of their investments in the firm. Of course, a lender may  require otherwise or a court may “pierce the corporate veil” (see below). C. C ORPORATE T AXATION Corporate   profits   are   taxed   twice:   as   income   to   the   corporation   and,   with   some  exceptions, as income to the shareholders when distributed as dividends. 1. Retained Earnings Profits that are not distributed are retained earnings and can be invested for higher  profits, which may cause the price of the stock to rise, benefiting shareholders. 2. Offshore Low-Tax Jurisdictions A holding company (or parent company) holds the shares of another company. Such  firms are often established in offshore no-tax or low-tax jurisdictions. A corporation  whose shares are held in a holding company may transfer cash and other investments  to be taxed in that jurisdiction. D. C ONSTITUTIONAL R IGHTS OF C ORPORATIONS A corporation is recognized as a “legal person” and, under the Bill of Rights, has the  same rights as a natural person (see Chapter 4). A corporation is not a “natural citizen,”  however: only officers and employees have a right against self-incrimination, and the  privileges and immunities clause does not protect corporations. E. T ORTS AND C RIMINAL A CTS A corporation is liable for the torts committed by its agents within the course and scope  of employment. A corporation may be held liable for the crimes of its employees and  agents if the punishment for the crimes can be applied to a corporation. F. C ORPORATE S ENTENCING G UIDELINES The   guidelines   cover   thirty-two   levels   of   offenses.   Punishment   depends   on   the  seriousness of a charge, the amount of money involved, and the extent to which corporate  officers are involved. Sanctions are reduced when corporations cooperate to prevent,  investigate, and punish wrongdoing. G. C LASSIFICATION OF C ORPORATIONS 1. Domestic, Foreign, and Alien Corporations
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A corporation is a  domestic  corporation in the state in which it incorporated, a  foreign corporation in other states, and an   alien   corporation in other countries. A foreign  corporation normally must obtain a certificate of authority to do business in any  state except its home state.
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