ADMS 2610 Lecture Notes - Lecture 8: Legal Personality, Double Taxation, Privately Held Company
9 Sep 2016
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Quality decision making (only directors have the authority. Easy to generate capital: shares holders have limited liability = amount invested in shares. Transfer of share interests/ownership are simple transactions. Disadvantages complex, double taxation, conflict of interests (ethnical) Fiduciary: requires director to act in good faith at all times in dealing on behalf of the firm. ~ can"t make profit at the firms expense. Shareholder corporation: guarantee their right of long-term employment in exchange for shares. Shareholder shareholder: how they will vote or buy each other"s interest during disagreements. Shareholder private corporation: restricts their freedom of action. Purchaser does not inherit tax problems or tax position. Buyer will be able to amortize the fair market value paid for the goodwill over time. Can decide on which assets you intend to purchase. No worries of inadvertently purchasing undisclosed liabilities. Purchase price can be written off or depreciated over time. Original cost is deducted from sale proceeds if shares are resold.
