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Questions and Answers
What is a primary characteristic of a corporation?
What is a primary characteristic of a corporation?
- It has a separate legal personality from its owners. (correct)
- It is owned and operated by members for mutual benefit.
- It can dissolve with a change in ownership.
- It requires only 10 adults for formation.
Which statement accurately describes shareholder liability in a corporation?
Which statement accurately describes shareholder liability in a corporation?
- Shareholders can lose personal assets for corporate liabilities.
- Shareholders are liable for corporate debts equal to their voting power.
- Shareholder liability is limited to the amount of contributed capital. (correct)
- Shareholder liability is unlimited.
What is one disadvantage of a cooperative?
What is one disadvantage of a cooperative?
- Cooperatives can dissolve with changes in membership.
- Members have unlimited liability for debts.
- Members can easily transfer their ownership.
- Financial strength largely depends on member capital contributions. (correct)
Which of the following is a common advantage of forming a corporation?
Which of the following is a common advantage of forming a corporation?
What is the minimum number of people required to establish a corporation?
What is the minimum number of people required to establish a corporation?
What is a distinct feature of cooperatives compared to corporations?
What is a distinct feature of cooperatives compared to corporations?
Which of the following is NOT a disadvantage commonly associated with cooperatives?
Which of the following is NOT a disadvantage commonly associated with cooperatives?
What liability do cooperative members have?
What liability do cooperative members have?
Flashcards
What is a Corporation?
What is a Corporation?
A business organization with its own legal personality, separate from its owners. It's established by at least 5 individuals ('incorporators') and operates under the Corporation Code, registered with the SEC. Shareholders (owners) are responsible up to their investment, but have limited influence in operations. A board of directors elected by shareholders manages the company.
Limited Liability in Corporations
Limited Liability in Corporations
Shareholders in a corporation are only responsible for their investment, meaning their personal assets are protected from the company's debts. This protection isn't absolute and exceptions can occur, such as 'piercing the corporate veil' (when legal boundaries are blurred).
Unlimited Commercial Life
Unlimited Commercial Life
Corporations are legally allowed to exist indefinitely, even if ownership changes hands. This allows the business to continue operating without interruption, attracting long-term investors.
What is a Cooperative?
What is a Cooperative?
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Limited Liability in Cooperatives
Limited Liability in Cooperatives
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Government Support for Cooperatives
Government Support for Cooperatives
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Financial Dependence in Cooperatives
Financial Dependence in Cooperatives
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Challenges in Cooperative Management
Challenges in Cooperative Management
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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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