FINE 2000 Lecture Notes - Lecture 6: Double Taxation, Corporate Finance, Legal Personality

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ambergoat33

22 Jan 2018

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Ownership (represented by shares of stock) can be readily transferred, and the life of the corporation is therefore not limited. The corporation borrows money in its own name. As a result, the stockholders in a corporation have limited liability for corporate debts. The most they can lose is what they have invested. The relative ease of transferring ownership, the limited liability for business debts, and the unlimited life of the business are why the corporate form is superior for raising cash. If a corporation needs new equity, for example, it can sell new shares of stock and attract new investors: the corporate form has a significant disadvantage: Because a corporation is a legal person, it must pay taxes: money paid out to stockholders in the form of dividends is taxed again as income to those stockholders.

Related Questions

Which of the following contribute to a corporation's ability to build large pools of capital? That is, which of the following increase the willingness of investors to provide capital to a corporation?

I. limited liability

II. ease of transferring ownership

III. separation between the life of the business and the life of the owner

IV. double taxation of profits

V. agency costs

A. I only

B. I and III only

C. I, III, and IV only

D. I, II, and III only

E. I, II, III, and V only

copperferret659

Proof read please

In deciding which entity to use for a new business, it is good to review the benefits and disadvantage of each one. A corporation According to e-text (page 1094) A corporation is liable to third person for the act of it is officers, employees, and agent to the same extent that a natural person is liable act of agents and employees. Because of the corporation is a separate legal person debt, the debts that owe are ordinarily the obligation of the corporation only. It is good to know the advantage and the person itself is not responsible of the corporation debts because nobody want debts that goes after their personal properties. I think thatâs the reason business owner choose a form of corporation however, the double taxation of appreciated assets on sale or dissolution is a bad disadvantage but it can be a right choice for certain situation because nobody wants to hold liable for their business debts, or personal income or any other personal assets. An owner always wants taxable profit and retain growth to pay down their business debts, even though the corporations taxes are extremely higher than a LLC, but I still recommended a business to choose a corporation that better benefit for them. A LLC taxes are lower but owner is personally obligator to any debts. It is good to know that corporation can also deduct disability insurance for owner-employees which is a significant advantage, reduced gain for capital gain and audit potential for tax liability A corporation enjoys limited liability, while partner is personal liable for the business. Frost, T. S. (1984). In regard to taxes, a corporation can generate tax saving if the corporate tax rate is lower than the personal one and if earning is retained in the corporation. the worse part will be the shareholder because they can be held personally liable for corporate debt and the creditor can now go after the shareholder property and their bank account and other assets that satisfy their dues. Frost, T. S. (1984). Tax aspects of the form of doing business. Dun and Bradstreet, Inc.D & B Reports, 22(1), 58. Starkman, J. (2007). Advantages of a C corporation. The Tax Adviser, 38(10), 617-618.

lavenderfrog549

1.A new issue of corporate securities sold to the general public must be

a, registered w/ the SEC

b,initially sold through brokers

c,offered initially to existing stockholders

d,bought by specialists in corporate securities

2. The present value of a dollar (choose two)

a increase as the interest rate increases

b.decreases as thee interest ratee increases

c.increases as the time period increases

d.decreases as the time period increases

3. Th future value of an annuity is( choose two)

a,larger the higher the rate of interest

b,smaller the higher the rate of interest

c,lager the greater the number of years

d,smaller the greater the number of years

4. With a Roth IRA, the individual

a,may deduct the annual contribution

b,earns tax free income

c,defers taxees

d,avoids estate taxes

5.Unsystematic risk is

a,the risk associated with movement in securities prices

b,reduced through diversification

c,higher when interest rates rise

d,the risk of loss of purchasing power

6. Advantagees of the corporate form of business include

a,limited liability for stockholders

b,avoid of state taxation

c,limited life

d,deductibility of dividends

7. Which of the following is correct for a bond priced at $1100 that has 8 years remaining until maturity, and a 10% coupon with semiannual payments?

a,each payment of interest equals $ 50

b,each payment of interest equals $55

c,each payment of interest equals $100

d,each payment of interest equals $110

coralsalmon136

FINE 2000 Lecture Notes - Lecture 6: Double Taxation, Corporate Finance, Legal Personality

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