[RSM424H1] - Midterm Exam Guide - Everything you need to know! (57 pages long)
Document Summary
Relationship between the corporation and its shareholders: corporations an introduction. Incorporated company = artificial person separate from owner (s): recognized by law as an entity: Has the power to act in its own right and to enter into enforceable legal agreements: a. Corporation defined: a corporation, as a separate entity: can buy, own, sell, and lease property. Not considered owned by the shareholders can borrow funds for its own use as well as loan funds to others. Shareholders are lia(cid:271)le for the (cid:272)orporatio(cid:374)"s de(cid:271)ts o(cid:374)l(cid:455) to the extend of capital contributions: b. Legal separation of the corporation from its shareholders creates a two tiered system of taxation: Shareholder is subject to a second level of tax on income from the corporation (ultimately income flows to individuals) The primary relationship - provides equity capital to the corporation. The secondary relationships shareholder as a creditor, supplier, customer, employee or lessor to the corporation: the primary relationship.
