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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
• Ownership (stock) is readily
• 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
• 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
• Partnership is dissolved when a
• Difficult to liquidate or transfer
partnership • Taxes generally higher, because
corporate income is taxed, and
dividends paid to owners are also
• More expensive to organize than
other business forms
• Subject to greater government
• Lacks secrecy, because stockholders must receive financial
The owners of a corporation,
whose ownership, or equity, is
evidenced by either common
stock or preferred stock.
The purest and most basic form
of corporate ownership.
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.
- Fall '13