chapter 1 lecture 2 - OBJECTIVE4 SummaryStatement The three...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Lecture 2 Learning Objectives 4-5 OBJECTIVE 4: Describe the  characteristics of a corporation. Summary Statement The   three   basic   forms   of   business   organization   are   sole   proprietorships partnerships,   and   corporations .   Accountants   recognize   each   form   as   an  economic   unit   separate   from   its   owners.   A   sole   proprietorship   is   an  unincorporated business owned by one person. A  partnership  is much like a sole  proprietorship except that it is owned by two or more persons. A   corporation,  unlike a sole proprietorship or partnership, is a legal entity separate from its  owners (the stockholders).  A corporation is a business organization chartered by the state to conduct  business. When a corporation is formed,  articles of incorporation  are filed with  the   state.   These   articles   become   a   contract   between   the   state   and   the  incorporators. A  share of stock  represents a unit of ownership in a corporation. A  corporation’s stockholders elect a board of directors to manage the business.  The   board   of   directors   determines   major   business   policies   and   selects   top  management to run the business. An  audit committee  is a subgroup of the board  of directors that is charged with ensuring that the board will be objective in  evaluating   management’s   performance;   it   also   engages   the   company’s  independent auditors and reviews their work. That separation of the ownership from the business is most distinct in a  corporation.  The word,  corporation  , comes from a Latin word, corpus, meaning  body, and corporations have a life of their own, apart from who owns them.  A 
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
change in the ownership of a corporation does not affect the legal existence of  that corporation, unlike a change in the ownership of a partnership or a  proprietorship.    In a corporation, a unit of ownership is called a share of capital  stock, or simply stock.    To form a corporation, individuals, termed incorporators,  request permission from the state in which they are organized to incorporate.   The state charters that corporation, thereby authorizing the company to do  business.   That charter from the state is important, in that it represents a  contract between the business and the state, and imposes certain government  requirements upon the business, one of which is to report to the corporation's  owners, known as shareholders.  Once incorporated, the corporation then can raise capital to acquire funds to  purchase assets and compete in the marketplace.  To raise capital, the  corporation sells shares of stock to investors.   When the corporation sells 
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 7

chapter 1 lecture 2 - OBJECTIVE4 SummaryStatement The three...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online