Business Administration 2257 Chapter Notes - Chapter 11: Authorised Capital, Pro Rata, Retained Earnings
5 Nov 2015
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Document Summary
Corporation: legal entity that"s separate and distinct from its owners (shareholders) 2 classifications: by purpose profit vs not-for-profit, by ownership public vs private. Separate legal existence: corporation acts under own name to buy, own, sell, borrow, etc , acts of shareholders don"t bind corporation unless they"re agents. Liability of shareholders limited to their investment in shares of corporation: creditors only have access to corporate assets to satisfy claims, creditors may demand personal guarantee from control shareholder. Transferable ownership rights: transfer of shares (selling/buying) is entirely up to shareholders, has no effect on corporation"s financial position, corporation only involved in original sale of share capital. Ability to acquire capital: fairly easy for corporation to obtain capital by issuing shares, buying shares is attractive to investors b/c limited liability and ease of transferability, small/private corporations can have more difficulty in acquiring capital. Continuous life: not affected by withdrawal, death or incapacity of shareholder, employee, or officer, continuous and indefinite life.
