Questions and Answers
What is a significant advantage of using a partnership structure for conducting business?
Which of the following is a disadvantage of a general partnership?
What defines a public corporation?
Which legal aspect is true for limited liability companies (LLCs)?
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How is income taxed for an S Corporation?
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Which factor primarily differentiates a corporation from a partnership?
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What is a common financial aspect shareholders face in corporations?
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What type of taxation do general partnerships typically face?
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What is one significant advantage of forming a limited liability company (LLC)?
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What limitation applies to shareholders of an S Corporation?
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What is a notable disadvantage of partnerships?
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How does a cooperative benefit its members?
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Which tax obligation do shareholders of an S Corporation face?
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What might employees of a corporation feel when they do not own shares?
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What is the primary role of the board of directors in a corporation?
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What distinguishing feature allows Limited Liability Companies (LLCs) to have more flexibility than corporations?
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What is a characteristic of corporations regarding disclosure of information?
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Which type of director can manage the operation of the company?
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Which statement about preferred stock is true?
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What distinguishes common stock from preferred stock?
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What is a significant disadvantage of a corporation compared to partnerships?
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What does voting by proxy allow shareholders to do?
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How are dividends treated for common stocks?
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What is one of the primary advantages of capital raised through a corporation compared to a partnership?
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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
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Sole Proprietorship
- Owned by a single individual.
- Income taxed as personal tax.
- Unlimited liability.
- Simplest business structure.
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Partnership
- Involves two or more owners.
- Income taxed as personal tax.
- Partners have unlimited liability.
- Convenient way for collaborative business operations.
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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.
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S Corporation
- Up to 100 shareholders.
- Taxed as a partnership.
- Shareholders enjoy limited liability.
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Limited Liability Company (LLC)
- No corporate tax; shareholders pay personal tax.
- Unlimited number of shareholders.
- Example: Google LLC.
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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
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Board of Directors
- Elected by shareholders to manage corporate operations.
- Responsible for setting and achieving long-term objectives.
- Hires corporate officers (CEO, CFO, COO).
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Types of Directors
- Outside Directors: Non-executive directors with no managerial oversight.
- Inside Directors: Executive directors who manage corporate operations.
Share Types in Corporations
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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.