BUS 214 Chapter Notes - Chapter 10: Financial Statement, Common Stock, Market Capitalization
Document Summary
Stockholders have limited liability for the corporation"s debts. Most stockholders can lose is cost of investment. These features attract stockholders to invest more capital. Stockholders own the corporation, but the board of directors - elected by the stockholders = appoints officers to manage the business. Potential problem: without safeguards, corporate officers may try to run the business for their own benefit and not the stockholders. Lo 1: explain the features of a corporation. A corporation is a distinct entity - an artificial person that exists apart from its owners, the stockholders, or shareholders. Assets and liabilities belong to the corporation and not its owners. Corporations have continuous lives regardless of changes in their ownership. Transfer of stock from one to another (buy/sell) does not affect continuity. Franchise tax keps the corporate charter in force. Corporate earnings are subject to double taxation on their income to the extent they are distributed to shareholders in the form of dividends.
