ACC 151 Lecture Notes - Lecture 18: Double Taxation, Issued Shares, Net Income
19 Jan 2016
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Acc 151 lecture 18 stockholders" equity. Advantages: can raise more capital than a proprietorship or partnership can, continuous life, ease of transferring ownership, limited liability of stockholders. Disadvantages: separation of ownership and management, double taxation of distributed profits, government regulation. Corporate organizers (incorporators) obtain a charter from the state. Charter includes authorization to issue shares of stock. Vote right to voting on matters that come before the stockholders. Dividends -- right to receive a proportionate part of any dividend. Liquidation -- right to receive a proportionate share of any assets remaining after corporation pays its liabilities in liquidation. Preemption -- right to maintain one"s proportionate ownership in the corporation. Includes stock accounts and any additional paid-in capital. Arbitrary amount assigned to share of stock. Usually set low to avoid legal issues. Most states do not allow companies to issue stock below par. Follows same pattern as accounting for common stock.
