ACCT207 Lecture Notes - Lecture 10: Preferred Stock, Common Stock, Retained Earnings

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Classified by purpose: either not-for-profit or for profit. Classified by ownership: either publicly held or privately held. Separate legal existence: acts under its own name rather than stockholders. Limited liability of stockholders: limited to their investment. Transferable ownership: shareholders may sell their stock. Ability to acquire capital: can obtain capital through issuing stock. Continuous life: not affected by withdrawal, death, or incapacity. Corporate management: prevents owners from having active role. Additional taxes: must pay income and taxes on cash dividends. Structure of a corporation by level of management: stockholders chairman/board of directors president/ceo vp treasurer and controller. File application charter granted corporation develops by-laws. Companies usually incorporate in a state with favorable corporate laws. Must obtain a license (if engaged in interstate commerce) from each state. Vote in board of directors election and actions that require their approval. Share the corporate earnings through receipt of dividends. Same % of ownership kept when new shares are issued (preemptive right)

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