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Lecture 7

COMMERCE 1AA3 Lecture Notes - Lecture 7: Issued Shares, Preferred Stock, Legal Personality

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Chapter 13: Corporations
Characteristics of Corporations
Separate legal entity from its owners
Limited liability of shareholders to the amount of their investment
Transferable ownership rights by buying and selling shares
Ability to acquire capital by issuing shares
Continuous and Indefinite Life
Corporations management
oShareholders manage through an elected board of directors
oBoard of directors selects corporation management
Government regulations articles of incorporations (669)
Income Tax
oTaxed as a separate entity
Forming a Corporation
Can incorporate federally or provincially
Done by filling articles of incorporation, providing info such as:
oName and Purpose of Company
oAmounts and kinds of share capital (common stock, preferred stock)
oNames and address of incorporations
oLocation of corporation’s head office
By-laws: Internal rules and policies
Organizational Cost
oCost of Forming a corporation
oNormally expensed
Ownership Rights of Shareholders
Ownership rights are in the form of shares, can be divided into different classes
oAs stated in articles of incorporations
oEach class has rights and privileges
oUsually referred to as common and preferred shares
Shareholders have right to:
oTo rate on certain matters
oTo dividends: the distribution of income
oTo remaining assets in a liquidation
Share Laws Considerations
Authorized share capital
oNumber of shares company is allowed to sell
oMany companies have unlimited number of shares
Issued shares
oAuthorized shares that have been actually sold
oIssued directly to investors as through on investment dealer
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