Public Corporations Objectives
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Questions and Answers

What is a significant advantage of using a partnership structure for conducting business?

  • Unlimited liability for all partners
  • Difficulty in decision-making
  • Complex compliance requirements
  • Tax on partners as individuals, not as a corporation (correct)
  • Which of the following is a disadvantage of a general partnership?

  • Ease of raising capital
  • Unlimited liability for partners (correct)
  • Limited decision-making ability
  • Double taxation on profits
  • What defines a public corporation?

  • Involves two or more owners with personal tax implications
  • Has more than 100 shareholders and sells shares to the public (correct)
  • Provides limited liability solely for its founders
  • Allows for a single owner with unlimited liability
  • Which legal aspect is true for limited liability companies (LLCs)?

    <p>They limit personal liability for members</p> Signup and view all the answers

    How is income taxed for an S Corporation?

    <p>As personal income for shareholders</p> Signup and view all the answers

    Which factor primarily differentiates a corporation from a partnership?

    <p>The legal identity as a separate entity</p> Signup and view all the answers

    What is a common financial aspect shareholders face in corporations?

    <p>Potential for dividend payments</p> Signup and view all the answers

    What type of taxation do general partnerships typically face?

    <p>Personal income tax for partners</p> Signup and view all the answers

    What is one significant advantage of forming a limited liability company (LLC)?

    <p>Shareholders have limited liability.</p> Signup and view all the answers

    What limitation applies to shareholders of an S Corporation?

    <p>They are allowed only up to 100 shareholders.</p> Signup and view all the answers

    What is a notable disadvantage of partnerships?

    <p>Liability is shared among partners.</p> Signup and view all the answers

    How does a cooperative benefit its members?

    <p>They allow members to pool resources for bulk purchasing.</p> Signup and view all the answers

    Which tax obligation do shareholders of an S Corporation face?

    <p>Personal tax on distributed profits.</p> Signup and view all the answers

    What might employees of a corporation feel when they do not own shares?

    <p>Disconnection from profit-sharing.</p> Signup and view all the answers

    What is the primary role of the board of directors in a corporation?

    <p>To set long-range objectives and ensure they are met</p> Signup and view all the answers

    What distinguishing feature allows Limited Liability Companies (LLCs) to have more flexibility than corporations?

    <p>There is no limit on the number of shareholders.</p> Signup and view all the answers

    What is a characteristic of corporations regarding disclosure of information?

    <p>They are required to submit their financial information to the public.</p> Signup and view all the answers

    Which type of director can manage the operation of the company?

    <p>Inside directors</p> Signup and view all the answers

    Which statement about preferred stock is true?

    <p>Preferred shareholders receive dividends before common shareholders</p> Signup and view all the answers

    What distinguishes common stock from preferred stock?

    <p>Common stockholders have voting rights in corporate decisions</p> Signup and view all the answers

    What is a significant disadvantage of a corporation compared to partnerships?

    <p>Complex taxation structure</p> Signup and view all the answers

    What does voting by proxy allow shareholders to do?

    <p>Assign their voting privilege to someone else</p> Signup and view all the answers

    How are dividends treated for common stocks?

    <p>Common stockholders may not receive dividends at all</p> Signup and view all the answers

    What is one of the primary advantages of capital raised through a corporation compared to a partnership?

    <p>Corporations can raise funds through public shares</p> Signup and view all the answers

    Study Notes

    Objectives of Public Corporations

    • Designed to provide essential goods and services efficiently.
    • Required to pursue non-commercial goals alongside commercial objectives.

    Types of Business Ownership

    • Sole Proprietorship

      • Owned by a single individual.
      • Income taxed as personal tax.
      • Unlimited liability.
      • Simplest business structure.
    • Partnership

      • Involves two or more owners.
      • Income taxed as personal tax.
      • Partners have unlimited liability.
      • Convenient way for collaborative business operations.
    • Corporation

      • Can have any number of shareholders.
      • Subject to double taxation (corporate tax and personal tax).
      • Private Corporation: 1-50 shareholders; limited disclosure.
      • Public Corporation: 2 or more shareholders; shares available publicly.
    • S Corporation

      • Up to 100 shareholders.
      • Taxed as a partnership.
      • Shareholders enjoy limited liability.
    • Limited Liability Company (LLC)

      • No corporate tax; shareholders pay personal tax.
      • Unlimited number of shareholders.
      • Example: Google LLC.
    • Cooperatives (Co-ops)

      • Formed by small businesses pooling resources.
      • Help members obtain discounts through collective purchasing.

    Financial Disclosure

    • Corporations are required to publicly share financial information.
    • Competitors have access to this financial data.

    Employee and Owner Dynamics

    • Employees without shares are just employees and do not share ownership.
    • Non-shareholding directors may feel they work solely for shareholders' profit.

    Joint Ventures

    • Collaboration between two business organizations to jointly manage a project.
    • May result in the creation of a new company owned by the two original companies.

    Elements of a Corporation

    • Board of Directors

      • Elected by shareholders to manage corporate operations.
      • Responsible for setting and achieving long-term objectives.
      • Hires corporate officers (CEO, CFO, COO).
    • Types of Directors

      • Outside Directors: Non-executive directors with no managerial oversight.
      • Inside Directors: Executive directors who manage corporate operations.

    Share Types in Corporations

    • Preferred Stock

      • Shareholders cannot vote on company decisions.
      • Receive dividends before common stockholders.
    • Common Stock

      • Shareholders have voting rights for company decisions.
      • Not guaranteed to receive dividends.
      • Can vote by proxy through written authorization.

    Historical Example of Co-ops

    • In 1930, three cranberry growers initiated a co-op to expand market access.
    • By 1976, membership extended to grapefruit growers to broaden buying power.

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    Description

    This quiz examines the complex objectives of public corporations, exploring how they balance commercial efficiency with non-commercial goals. It delves into the structure, ownership, taxation, and liability aspects that influence their operations.

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