ADMS 2500 Chapter Notes - Chapter 11: Toronto Stock Exchange, Canada Business Corporations Act, Dividend Tax
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Issuances of shares for assets other than cash. Two economic resources of a firm: non owners provide funds to a firm this is shown on the balance sheet as liabilities, owners provide funds this is shown on the balance sheet as owners(cid:284) equity. Three major advantages to incorporation: the corporate form provides the owner (shareholder) with limited liability. If the corporation becomes insolvent, creditors(cid:284) claims are limited to the assets of the corporate entity. The corporation(cid:284)s creditors cannot claim the assets of the individual owners. Corporations must pay income tax on earnings whether or not earnings are distributed to shareholders. Remaining earnings, distributed as dividends are taxed again in the shareholders(cid:284) hands. Dividends received from canadian corporations are eligible for a dividend tax credit. Depending on the individual(cid:284)s personal tax rate, this can largely eliminate the double taxation: corporations are generally subject to more government regulation and supervision than unincorporated businesses face.