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30 Cards in this Set

  • Front
  • Back
an entity created by law that is separate from its owners
Advantages of corporate Characteristics
Spearate legal entity, limited liability of stockholders, transferable ownership rights, continuous life, lack of mutual agency for stockholders, ease of capital accumulation.
Separate legal entity
a corporation conducts its affairs with the same rights, duties, and responsibilities of a person.
Limited liability of stockholders
Stockholders are neither liable for corporate acts nor corporate debt.
Transferable ownership rights
The transfer of shares from one stockholder to another usually has no effect on the corporation or its operations except when this causes a change in the directors who control or manage the corporation.
Continuous life
a corporation's life continues indefinitely because it is not tied to the physical lives of its owners.
Lack of mutual agency for stockholders
A corporation acts through its agents, who are its officers and managers. Stockholders, who are not its officers and managers, do not have the power to bind the corporation to contracts--referred to as lack of mutual agency.
Ease of capital accumulation
Buying stock is attractive to investors because 1 stockholders are not liable for the corporation's acts and debts, 2 stocks usually are transferred easily, 3 the life of the corporation is unlimited, and 4 stockholders are not corporate agents.
Disadvantages of corporate characteristics
Government regulation, Corporate taxation
Government regulation
a corporation mus meet requirements of a state's incorporation laws, which subject the corporation to state regulation and control. Proprietorships and partnerships avoid many of these regulations and governmental reports.
Corporate taxation
Corporations are subject to the same property and payroll taxes as proprietorships and partnerships plus additional taxes.
a corporation is created by obtaining a charter from a state government.
Organization expenses
the costs to organize a corporation; they include legal fees, promoters' fees, and amounts paid to obtain a charter.
Rights of stockholders at stockholders' meetings
2. sell or otherwise dispose of their stock.
3.Purchase their proportional share of any common stock later issued by the corporation.
4. Receive the same dividend, if any, on each common share of the corporation.
5. Share in any assets remaining after creditors are paid when, and if, the corporation is liquidated.
Common stock
corporations's basic ownership share; also generically called capital stock.
preemptive right
Protects stockholders' proportionate interest in the coporation.
keeps stockholder records and prepares official lists of stockholders for stockholder meetings and dividend payments.
Capital stock
a general term that refers to anyshares issued to obtain capital.
Authorized stock
the number of shares that a coporation's charter allows it to sell.
Market value per share
the price at which a stock is bought and sold.
Par value stock
Class of stock assigned a par value by the corporate charter.
Par value
value assigned a share of stock by the corporate charter when the stock is authorized.
Minimum legal capital
amount of assets dfined by law that stockholders must invest in a corporation.
No-par value stock
stock not assigned a value per share by the corporate charter.
Stated value stock
no par stock to which the directors assign a "stated" value per share.
Stockholders' equity
a corporation's equity' also called shareholders equity or corporate capital
Contributed capital
total amount of cash and other assets received from stockholders in exchange for stock; aslo called paidin capital.
Retained earnings
the cumulative net income retained by a corporation.
Premium on stock
occurs when a corporation sells its stock for more than par value
Contributed capital in excess of par value
is not revenue and is not listed on the income statement, reported as part of equity.