7) The board should establish a suitable committee structureconsistent with the institution's size and complexitythat encourages open participation by independent directors What are the Characteristics of Corporations? No managerial skills needed from stockholders because decisions are made by the Board of Directors. B/C the principal puts the agent in a position of trust, the principal should bear the loss, AgencyAction Binding the Corporation Types of Authority Ratification of Authority , Focuses on the principal, if the agent has acted w/out authority but the principal takes no steps to repudiate the authority and accepts the benefits of the authority, than we can say that the principal has ratified the authority c) If you or a family member are affiliation in any way with some outside auditor of the company, i) *Audit Committee* The five main characteristics of a corporation are limited liability, shareholder ownership, double taxation, continuing lifespan and, in most cases, professional management. 3. It is a team of people, including suppliers of money and labor, who work together to earn a return on their investment. a) Company records in its books information concerning every transaction in which it's involved The filing fee for Articles of Incorporation is $100. i) If there is an emergency, the notice requirement can be waived, A) Directors Partnership income and expenses are said to "flow/pass through" to the partners in proportion to their ownership interests. ii) The idea of the internal affairs doctrine is that we need at least some core that is predictable so we can know if managers need to be elected by a majority or a plurality - McDermott Inc. v. Lewis. a. inventory Amazon was founded in 1994 and is a world leader in e-commerce. Apple. Expert Answer. Additional taxes. A corporation is a legal entity, meaning it is a separate entity from its owners who are called stockholders. 7 Which is characteristic of a limited liability company ( LLC )? \text{Direct materials}&\$56\\ A) Articles of Incorporation Every statute requires that each corporation have its own articles of incorporation (sometimes called the charter or the certificate of incorporation), which must be filed with state officials and which represents the "constitution" of that corporation, A) Corporations raise money by issuing securities to their investors. OutputTCMC25,000$100,000$0.5050,000150,0001.0075,000187,5002.50100,000275,5003.00\begin{array}{rrr} Competitive: I thrive under pressure. vii) Can elect tax treatment as partnership They compliment others when deserved. b) Typically, preferred stockholders will receive a fixed dividend payment although the declaration of a preferred stock dividend is also at the discretion of the board of directors Professional management. We use cookies to ensure that we give you the best experience on our website. Flexibility of transferable ownership. $$ Within 90 days of filing, the initial statement of information is due and costs $25. Advantage of Corporations. Par. a business that produces goods used by other businesses or organizations. is a legal agreement to use the name and sell the products of a parent company in a designated geographic area. Living, $475.75; fixed,$679.65; share of annual, $291.17. Enforcing a claim for breach of fiduciary duty i) Shareholders are not authorized to act directly for the corporation, and thus cannot enforce a corporate claim against the managers They think of others. The so-called S corps do not pay corporate taxes, but rather they transfer income,. Which is characteristic of a limited liability company ( LLC )? They are honest in relationships. Ownership in a corporation is represented by stock certificates, which is why the owners are called stockholders. b) Limited partners have no voice in the active management of the partnership For the calculation of averages, use the following amounts for 2014: total assets =$2,095,083; total stockholders equity = $1,350,300. Separate legal existence 2. 25,000 & \$ 100,000 & \$ 0.50 \\ ii) Formed by filing articles of incorporation with the state v) Manager-managed: managers act for LLC; members vote on major matters caveat venditor. c) Any recovery, either through judgment or settlement, belongs to the corporation for whose benefits the suit has been brought, Rights of the Corporation under the First Amendment, A) Corporations may not use treasury funds as expenditures to support political candidates Separation of owners and entity (no mutual agency). b) Long-term liabilities Debts due more than one year from the balance sheet date, Accounting & Financial Reporting - Equity, Equity (sometimes referred to as net worth) represents the accounting value of the interests of the firm's owners B) Corporations should do a human rights due diligence analysis to examine risks of violations of human rights, i) If you are representing the corporation, then the corporation is your client, not any of the individual directors, officers or shareholders A company with fewer than 100 employees is generally considered a small-sized business, while one with between 100 and 1,500 employees is a medium-sized business. Once a public corporation sells its initial offering of stock, it is not part of any subsequent transfers except as a record keeper of share ownership. Separate Legal Existence. (7) Whether the dealing between the entities are at arms length; A closely held business has only a few shareholders. Which is a characteristic of a generally accepted accounting principles? E) Knowing where the institution stands and staying abreast of its financial health b) Anytime you're dealing w/ a wholly owned subsidiary, it's a good idea for the other company to do its due diligence and inquire whether the subsidiary is authorized to act in the way that it is acting w/out approval of its parent company, AgencyAction Binding the Corporation Types of Authority Inherent Authority , Inherent Authority Infers from the position holds that the agent has authority B) Cash flow just makes certain type of adjustments as to which components of the statement reflect where cash is going in and going out (2) Inadequate capitalization (big one); Legal status 5. (6) The degree of discretion shown by the allegedly dominant corporation; Owner authority and control 7. 1) Labor laws that govern employees; environmental law; etc. i) Shareholders are not authorized to act directly for the corporation, and thus cannot enforce a corporate claim against the managers. In some states, stockholders are called shareholders. i) Like the alter ego doctrine, the single business enterprise doctrine is an equitable remedy, which applies when the corporate form is "used as part of an unfair device to achieve an inequitable result" C) Actively helping plan the long-term direction and goals for the institution a) Board of directors must recommend the amendment, which must then be approved by the holders of at least a majority of its outstanding stock Organization costs, including legal fees, underwriters' fees for stock and bond issues, and incorporation fees, are recorded as an intangible asset and amortized over a period of time not to exceed 40 years. Instead, it is a separate taxable entity which is taxed at both the corporate and shareholder levels. A general corporation may have an unlimited number of stockholders that, due to the separate legal nature of the corporation, are protected from the creditors of the business. A corporation is subject to numerous state and federal regulations. It can be easier for a corporation to acquire debt and equity, since it is not constrained by the financial resources of a few owners. 3) If the corporation becomes insolvent, and its assets must be liquidated, debt securities will have priority over equity securities " [Leadership] is all about influencing people," said Kirstin Lynde, founder of leadership development firm Catalyze Associates, in a Facebook Live interview. 2023 Course Hero, Inc. All rights reserved. Corporations must pay federal and state income taxes as a separate legal entity. B) Revenues and expenses are recorded on an accrued basis rather than a cash basis Corporation acts under its own name rather than in the name of its stockholders. b) Until shares are first sold to stockholders they are authorized, but unissued b) You or a family member received more than $120,000 in direct compensation in any twelve month period over the past three years Ease of formation Requires government approval 3. v) Personal liability 2) Board members should be recruited for their relevant business, industry or financial expertise Now a new generation of influencers has come on the scene. from your Reading List will also remove any $50 per unit ii) The derivative suit was developed to alleviate this problem maintaining employment process training and development staff. Terms in this set (8) 2. Corporation management (can be separate from ownership). b) Action is brought against the corporation for failure to bring an action in law against some third party, most often an alleged careless or unfaithful manager, who is also a defendant in the suit b) If one of two innocent parties must suffer due to betrayal of trusteither the principal or the third partythe loss should fall on the party who is most at fault. a) Company classifies and analyzes the information and presents it in a set of financial statements c) The most common forms of preference are the right of the preferred stockholders to receive a dividend before any dividends are paid to the holders of common stock and the right to receive distributions in liquidation before any distributions are made to the common stock. Save my name, email, and website in this browser for the next time I comment. Assume that the real interest rate, predicted inflation, and inflation are all equal to zero. B) Represents the difference/surplus between revenues and cost Characteristics of a corporation include a alimited lifespan b. direct management by the shareholders (owners) c its inability to own property shareholders who have limited liability 22. iii) At-will or definite period a. a) Appears on the right side of the balance sheet b/c it may be considered as the amount that is "owed" to the stockholders, Accounting & Financial Reporting - Financial statements are produced through a 3-stage process, i) First "Recording and controls" stage It can be easier for a corporation to acquire debt and equity, since it is not constrained by the financial resources of a few owners. Double taxation of dividends c. Charter d. Characteristics of Entrepreneurs 1.Risk taker 2. The five main characteristics of a corporation are limited liability, shareholder ownership, double taxation, continuing lifespan and, in most cases, professional management. Was 2016 stronger or weaker than 2015? Limited to their investment. A) The corporation is a separate legal person, but can neither sue nor be sued. The corporation is considered a separate legal entity, conducting business in its own name. a) General partners have comparable liability to the liability they have in a general partnership, but a limited partners liability is limited to the capital she has contributed to the partnership Government regualtions. vii) Majority vote by directors and shareholders, Characteristics of a Limited Liability Company, i) Legal entity distinct from members c) Informed and rational basis = duty of care These characteristics are as follows: Capital acquisition. Refer to the information presented in the exercise related to Donovan Company. If the order was accepted, the tires would be shipped overseas for an additional shipping cost of $7.50 per tire. Stock of a privately held company is not traded on an exchange and there are usually only a small number of stockholders. 2) Even if the corporation does well, the holder of the debt security only receives a fixed payment An LLCs life is terminated at any members choice or death Caleb Brown is the sole owner of a bicycle sales and repair shop from several years. Identify the two types of relevant costs. Corporation acts under its own name rather than in the name of its stockholders. A number of characteristics distinguish a corporation from a sole proprietor or partnership. Members of Gen Zloosely, people born from 1995 to 2010are true digital natives: from earliest youth, they have been exposed to the internet, to social networks, and to mobile systems. a) Is that third party reasonable in assuming that the agent has the authority to bind the principal? The par value of corporate shares issued represents a corporations legal capital. B) Internal Affairs Doctrine Means that the relationship between shareholders and managers (directors and officers), will be governed by the corporate statutes and case law of the state where the corporation is incorporated It must be paid back with interest, A person sets his/her money aside for future income to meet long term goals, individuals purchase part of the corporation. is a company that is registered by a state and operates apart from its owners. Limited liability 5. refusal to buy a company's services or product. a) Gross negligence is the standard for board of directors Previous ii) No one factor is decisive vi) No member liability How do I look up my California corporation number? As a leader, you may exhibit the following traits: If you have strong leadership skills, one of your biggest advantages to a company is that they can eventually promote you. 1) If they find no irregularities they offer a "clean" opinion that it represents fairly in all material aspects Transferable ownership rights. Tip. traits. Which is a disadvantage of a corporate structure? C. The title of the corporation is limited by the death of the owner Which of the following is a characteristic of a limited liability company (LLC)? Prepare a differential analysis dated January 21 on whether to reject (Alternative 1) or accept (Alternative 2) the special order from Euro Motors. advantages of corporations, disadvantages of corporations, Ability to increase capital by selling stocks, No managerial skills needed from stockholders because decisions are made by the Board of Directors, Financial and Managerial Accounting: Information for Decisions, Barbara Chiappetta, John J. Can have current assets, fixed assets, and intangible assets is the process of starting and managing your own business. What are 2 characteristics of a corporation? If she does not believe that the agent has the authority, the principal is under a duty to investigate Personal assets of stockholders are not available to creditors or lenders seeking payment of amounts owed by the corporation. iii) Corporate managers who breach their fiduciary duties can be held personally liable for any losses they cause the corporation, i) In order to encourage directors to take risks on behalf of the corporation w/out fear of personal liability for any losses which may ensue, courts have developed this rule What are 3 characteristics of corporations? Shareholders who are mutual agents b. 1) GAAP requires firms to carry intangible assets they have purchased at cost less an allowance for amortization (the equivalent of depreciation, applied to intangibles), Accounting & Financial Reporting - Liabilities, Liabilities account for the accounts that firms owe to others, whether pursuant to written evidence of indebtness or otherwise Stakeholder theory of the modern corporation. Relevant. They call their parents regularly. G) Attending meetings and actively participating in board discussions In a corporation, one stockholder cannot jeopardize other stockholders through poor decision making. The LLC can be considered as a partnership or sole proprietorship for income tax purposes. iv) Board of directors manage Descriptions Characteristic 1. --owned by shareholders. 10) The board and board committees should conduct a rigorous self-assessment at least every two years, Key Responsibilities of Effective Board Members, A) Providing the institution with effective, competent management 1) A principal advantage of the corporate form is that a shareholders potential loss is limited to the amount that she invested in the enterprise. Ability to raise large capital amounts 2. Legal status 5. a) Company, usually with the assistance of independent public accountants, verifies the information it has recorded and the manner in which it has presented the financial accounting, Accounting & Financial Reporting - Bookkeeping, i) Every transaction which a company is involved is included in the company's leger Usually represents a very large portion of the assets of firms engaged in financing businesses iii) Paid in equity + retained earnings = Total Equity, Accounting & Financial Reporting - Retained Earnings - Ratio's, i) Investors look at financial statements in different ways, such as Certain industries, such as banks, financial institutions, and gaming, are also subject to regulations from other governmental agencies. A corporation is a separate legal entity that stockholders own. Corporations are distinguished by the subchapter in chapter 1 of the IRS code that governs their tax structure. Legal status Separate legal entity 8. A. 5 What are the 4 attributes of corporation? Capital Acquisition It can be easier for a corporation to acquire debt and equity, since it is not constrained by the financial resources of a few owners. The loan and the interest are repayable in full in November. Question: Chapter 12 21. How to Market Your Business with Webinars? One of the main disadvantages of the corporate form is the a. b. c. inability to raise large amounts of capital double taxation . Timeless. What are some good character traits to have? Decision maker 3. i) If you have a good cash flow from operating activities you have a health business A) Waste only is "what the corporation has received is so inadequate in value that no person of ordinary, sound business judgment would deem it worth that which the corporation has paid" Limited Liability of Stockholders. a) Usually 1/3, but articles of incorporation or bylaws will specify iii) Perpetual life 2) Was not made in good faith; A) Closed Corporation Held by a small group of people and not publicly traded. What will she spend in each stage of her life? I) Ensuring and maintaining the board's independence, Red Flags of Deficiency in Governance to Watch For, A) A strong or dominant CEO "runs the show," soliciting little or no input from others and not tolerating the opposing view One that can be called on when needed, the next best choice you could have taken (Because there are never enough resources to produce all the goods and services people want there must be trade-offs. The five main characteristics of a corporation are limited liability, shareholder ownership, double taxation, continuing lifespan and, in most cases, professional management. to put money to use by buying a part of something, so that you may have profitable returns such as interest, or income. How does the CPI differ from the Myers-Briggs test? Early in your career, you might exercise authority by being the go-to person on a certain subject within your . 1) Here, analysts typically like a 1:1 ratio, suggesting you have as much equity as you owe debt, Accounting & Financial Reporting - Income Statement, A) Within a fiscal year the money that a company earns and the expenses it incurs and the result is the net income or net profit, and at the end of the fiscal year the net income is carried over to the total equity line on the balance sheet a market where stocks and bonds are traded. maintaining employment process training and development staff, Latin for "let the seller beware"; sellers need to take responsibility for the products they sell, process by which people attempt to preserve, protect, and manage resources, one who selects, purchases, uses, or disposes of services or goods, a movement to pass laws that protect the consumer from unsafe and unfair business practices, basic rights of consumers to safety, to be heard, to choose, to be informed, to have problems corrected, to consumer education, and to service, business practices that are deliberately misleading, the legal responsibility a manufacturer has to make a safe product, collecting items for processing so that they might be used again, when someone advertises a product at a low price to lure consumers into the store, then tries to get them to switch to a more expensive item, a card allowing someone to make a purchase on borrowed money. \end{array} (8) Whether the corporations are treated as independent profit centers (big one); Here are 15 professional characteristics that can help you earn the respect of others and position you for promotions: 1. 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