Ch1

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Unformatted text preview: ncluded and taxed on partner’s tax return • Owners have limited liability, which guarantees that they cannot lose more than they invested • Can achieve large size via sale of stock • Ownership (stock) is readily transferable • Long life of firm • Can hire professional managers • Has better access to financing • Receives certain tax advantages Weaknesses • Owner has unlimited liability— total wealth can be taken to satisfy debts • Limited fund-raising power tends to inhibit growth • Proprietor must be jack-of-alltrades • Difficult to give employees longrun career opportunities • Lacks continuity when proprietor dies • Owners have unlimited liability and may have to cover debts of other partners • Partnership is dissolved when a partner dies • Difficult to liquidate or transfer partnership • Taxes generally higher, because corporate income is taxed, and dividends paid to owners are also taxed • More expensive to organize than other business forms • Subject to greater government regulation • Lacks secrecy, because stockholders must receive financial reports stockholders The owners of a corporation, whose ownership, or equity, is evidenced by either common stock or preferred stock. common stock The purest and most basic form of corporate ownership. dividends Periodic distributions of earnings to the stockholders of a firm. board of directors Group elected by the firm’s stockholders and having ultimate authority to guide corporate affairs and make general policy. corporations are involved in all types of businesses, manufacturing corporations account for the largest portion of corporate business receipts and net profits. The key strengths and weaknesses of large corporations are summarized in Table 1.1. The owners of a corporation are its stockholders, whose ownership, or equity, is evidenced by either common stock or preferred stock.1 These forms of ownership are defined and discussed in Chapter 7; at this point suffice it to say that common stock is the purest and most basic form of corporate ownership. Stockholders expect to earn a retur...
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This document was uploaded on 01/19/2014.

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