corporation

Examples of corporation in the following topics:

• Pros and Cons of a Corporation

  • The corporation is one type of business structure.
  • Similarly, the corporation does not cease to exist with the death of shareholders, directors, or officers of the corporation.
  • Another benefit of the corporate structure is that, in the United States, corporations are generally taxed at a lower rate than are individuals.
  • S corporations are merely corporations that elect to pass corporate income, losses, deductions, and credit through to their shareholders for federal tax purposes.
  • Also, certain corporate penalty taxes (e.g., accumulated earnings tax, personal holding company tax) and the alternative minimum tax do not apply to an S corporation.

• Corporate Taxes

  • Corporate taxes are especially complicated because of the inherent complexities of corporations themselves.
  • Corporate taxation differs depending upon the legal form of the corporation.
  • A C corporation refers to any corporation that is taxed separately from its owners.
  • Owners of C corporations are personally protected from any liability of the company - an idea known as the corporate veil.
  • Shareholders generally cannot include corporations or partnerships (certain trusts, estates and tax-exempt corporations are permitted).

• Corporations

  • A corporation has limited liability.Stockholders own the corporation, and they are not liable for a corporation's debt.If a corporation fails, subsequently, the stockholders only lose their investment, the amount of common stock that they had purchased.
  • Stockholders can easily transfer corporate ownership.Stocks are certificates that represent ownership in a corporation, and stockholders can freely buy or sell stock to other investors through the stock market.
  • Stockholders do not have a mutual agency relationship, where the stockholders cannot bind a corporation to contracts.Stockholders have no say in the daily operation of the corporation even though they own the corporation.
  • Corporations have two disadvantages.First, government heavily regulates corporations.Corporations file many reports with government because corporations can expand into many countries, markets, and industries.Corporations may encourage regulations because bureaucratic red tape creates barriers to entry.Thus, new companies experience troubles entering the market with complex and arduous regulations.Second, government imposes taxes twice on corporations.Corporations pay taxes from their profits.Then stockholders receive profit from the corporation as dividends, and the dividends become income to the stockholder that a government also taxes.
  • Protected Preferred Stock – a corporation must deposit part of its profits into a fund, and, thus, the corporation can guarantee dividend payments to preferred stockholders.

• Formation of the Corporation

  • Historically, corporations were created by a charter granted by government .
  • Corporations generally have a distinct name.
  • In many jurisdictions, corporations whose shareholders benefit from limited liability are required to publish annual financial statements and other data, so that creditors who do business with the corporation are able to assess the creditworthiness of the corporation and cannot enforce claims against shareholders.
  • Some corporations choose not to have a descriptive element.
  • Usually, there are also corporate bylaws which must be filed with the state.

• Characteristics of a Corporation

  • Corporations are separate legal entities with a wide variety of legal, organizational, and operational characteristics.
  • Corporations are, in theory, owned and controlled by members and shareholders.
  • It's worth noting what is traditionally required of an organization to become a corporation.
  • This chart illustrates the overall corporate profit over time in the U.S.
  • This chart illustrates the effective corporate tax rate in the U.S. over time.

• Defining Corporate Governance

  • Corporate governance is the system by which companies are directed and controlled.
  • Corporate governance is the system by which companies are directed and controlled.
  • An important theme of corporate governance is the nature and extent of accountability of people in the business.
  • Integrity should be a fundamental requirement in choosing corporate officers and board members.
  • Corporate governance deals with the conflicts of interests in a company.

• Forms of Business Organizations

  • This chapter defines and distinguishes the three business forms: proprietorships,partnerships, and corporations.
  • Unfortunately, the corporate structure has several disadvantageswith the main one being susceptible to corporate fraud.
  • Finally, corporations dominate international trade and finance, which is why we study them in this book.
  • A corporation becomes the last form, and the focus of this chapter.
  • For instance, shareholders represent the owners of the corporation, and they should benefit.Sometimes corporate managers lose sight of earning profits.

• Default Risk and Bond Price

  • Rating companies such as Standard & Poor's Corporation and Moody's Investor Service assess the default risk for corporations.
  • We draw the supply and demand for two markets: government bond market and corporate bond market.
  • Unfortunately, a corporation could have financial trouble, so investors believe the corporation could default.
  • Some investors demand fewer corporate bonds and invest more in government bonds.
  • Hence, the difference between government and corporate interest rates would widen.

• Conflicts Between Managers and Shareholders

  • The "agency view" of corporations argues that the decisions rights (or control) of a corporation should be entrusted to a manager, so that the manager can act in the interest of shareholders .
  • Shareholders, on the other hand, are individuals or institutions that legally own shares of stock in a corporation.
  • Another important goal is to evaluate whether a corporate governance system hampers or improves the efficiency of an organization.
  • Research of this type is particularly focused on how corporate governance impacts the welfare of shareholders.
  • After the high-profile collapse of a number of large corporations in the past two decades, several of which involved accounting fraud, there has been a renewed public interest in how modern corporations practice governance, particularly regarding accounting.

• Liquidity and Bond Prices

  • On the other hand, corporate bonds are not as liquid and not as widely traded, so investors have more difficulties in buying and selling them.
  • We start the analysis with the same liquidity in both the government bond and corporate bond markets in Figure 2.
  • However, investors reduce their purchases of corporate bonds because they are less liquid, decreasing the demand function and shifting it leftward.
  • On the other hand, the corporate bond prices decrease, raising the market interest rate for corporate bond.