Public Corporations Objectives

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)?

They limit personal liability for members Signup and view all the answers

How is income taxed for an S Corporation?

As personal income for shareholders Signup and view all the answers

Which factor primarily differentiates a corporation from a partnership?

The legal identity as a separate entity Signup and view all the answers

What is a common financial aspect shareholders face in corporations?

Potential for dividend payments Signup and view all the answers

What type of taxation do general partnerships typically face?

Personal income tax for partners Signup and view all the answers

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

Shareholders have limited liability. Signup and view all the answers

What limitation applies to shareholders of an S Corporation?

They are allowed only up to 100 shareholders. Signup and view all the answers

What is a notable disadvantage of partnerships?

Liability is shared among partners. Signup and view all the answers

How does a cooperative benefit its members?

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

Which tax obligation do shareholders of an S Corporation face?

Personal tax on distributed profits. Signup and view all the answers

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

Disconnection from profit-sharing. Signup and view all the answers

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

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

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

There is no limit on the number of shareholders. Signup and view all the answers

What is a characteristic of corporations regarding disclosure of information?

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

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

Inside directors Signup and view all the answers

Which statement about preferred stock is true?

Preferred shareholders receive dividends before common shareholders Signup and view all the answers

What distinguishes common stock from preferred stock?

Common stockholders have voting rights in corporate decisions Signup and view all the answers

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

Complex taxation structure Signup and view all the answers

What does voting by proxy allow shareholders to do?

Assign their voting privilege to someone else Signup and view all the answers

How are dividends treated for common stocks?

Common stockholders may not receive dividends at all Signup and view all the answers

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

Corporations can raise funds through public shares 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.

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.