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Questions and Answers
What is a primary characteristic of a corporation?
What is a primary characteristic of a corporation?
Which statement accurately describes shareholder liability in a corporation?
Which statement accurately describes shareholder liability in a corporation?
What is one disadvantage of a cooperative?
What is one disadvantage of a cooperative?
Which of the following is a common advantage of forming a corporation?
Which of the following is a common advantage of forming a corporation?
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What is the minimum number of people required to establish a corporation?
What is the minimum number of people required to establish a corporation?
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What is a distinct feature of cooperatives compared to corporations?
What is a distinct feature of cooperatives compared to corporations?
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Which of the following is NOT a disadvantage commonly associated with cooperatives?
Which of the following is NOT a disadvantage commonly associated with cooperatives?
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What liability do cooperative members have?
What liability do cooperative members have?
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Study Notes
Corporations
- A business entity with separate legal personality from its owners
- Created under the Corporation Code and registered with the Securities and Exchange Commission (SEC)
- Composed of at least five natural persons (incorporators)
- Owners (stockholders) have limited liability
- Liability is restricted to the amount of capital contributed
- Stockholders are not personally liable for corporate debts (except in specific cases like piercing the corporate veil)
- Directors manage corporate activities, elected by stockholders
- Officers can be held liable in some labor cases (e.g., illegal dismissal)
- Difficult to form, organize, and supervise
Advantages of Corporations
- Unlimited commercial life – unaffected by ownership changes
- Easier capital raising through stock sales
- Easier ownership transfer
Disadvantages of Corporations
- Regulatory restrictions (can be costly)
- High organizational and operational costs
- Double taxation (income tax on corporate profits and individual income from dividends)
Cooperatives
- Business organization owned by individuals
- Operated for mutual benefit
- Members contribute capital and share risks/benefits
- Members are called members
- Achieve lawful social or economic goals
- Governed by cooperative principles
- Can be incorporated or unincorporated
Advantages of Cooperatives
- Simple formation (requires only 10 adults)
- Open membership (regardless of religion, sex, color)
- Limited member liability, tied to capital contributions
- Members receive goods/services at reasonable prices
- Managed by democratically elected members
- Continued operation unaffected by member death, insolvency, or incapacity
- Surplus used for member welfare
- Government subsidies to enhance financial stability and growth
Disadvantages of Cooperatives
- Financial stability dependent on member contributions
- Management often lacks experienced managers
- Open meetings, lack of secrecy
- Products sold only in cash to outsiders
- Restrictions on operation flexibility from state regulations
- Potential for disputes to hinder management effectiveness
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Description
This quiz covers the essential features of corporations, including their legal structure, advantages, and disadvantages. Explore the roles of stockholders, directors, and officers within this business entity. Test your understanding of corporate law and structure with this comprehensive quiz.
