However, this special order would not have a sales commission. They call their parents regularly. The corporation?s resources are limited to what the stockholders can contribute. \text{Direct labor}&22\\ Ownership and management are vested in the same person. 3) Any independent internal audit function (even if part-time) should be in place and report directly to the audit committee Two key characteristics of a C-Corporation are: it provides limited liability to the owners/shareholders; and, unlike an S-Corp, it is not a flow-through entity. a business that uses mostly labor to offer intangible products. J.P. Morgan Chase. There may be thousands, even millions, of stockholders in a public company. A) The duty to provide the faith and confidence and the duty of care, loyalty and obedience Type of Tax Description Advantages Disadvantages Direct Taxes Personal income tax (time and money).Tax levied on incomes/wages/earnings Progressive - use a marginal tax rate that increases as the amount of taxable income increases, thus effective in income distribution. Which is characteristic of a limited liability company ( LLC )? Complimenting is not only a good thing to do, but a sign that you can be excited for other people?s triumphs. is someone who attempts to earn money and make profits by taking the risk of owning and operating their business. Limited to their investment. What are the characteristics of a good person? Stockholders consist of founders and key investors; not publicly traded; individuals act as s/h and assume the position of directors and officers typically. ii) Under this rule, courts will defer to the judgment of the board of directors, absent highly unusual circumstances, such as conflict of interest or gross inattention all the positive, good character traits, at least: Strong (mentally!) The filing fee for Articles of Incorporation is $100. v) Personal liability 1) CEO and CFO must personally certify that the financial statements are in fact accurate, Accounting & Financial Reporting - Retained Earnings, A) The cumulative amount the company has retained from its products agreement among two or more businesses to work together to provide a good or service; each business shares the costs of doing business as well as the profits. i) Directors can be inside or outside The five main characteristics of a corporation are limited liability, shareholder ownership, double taxation, continuing lifespan and, in most cases, professional management. Question: Characteristics of a corporation include? Cooperative : I get along well in a team setting. maintaining employment process training and development staff, Latin for "let the seller beware"; sellers need to take responsibility for the products they sell, process by which people attempt to preserve, protect, and manage resources, one who selects, purchases, uses, or disposes of services or goods, a movement to pass laws that protect the consumer from unsafe and unfair business practices, basic rights of consumers to safety, to be heard, to choose, to be informed, to have problems corrected, to consumer education, and to service, business practices that are deliberately misleading, the legal responsibility a manufacturer has to make a safe product, collecting items for processing so that they might be used again, when someone advertises a product at a low price to lure consumers into the store, then tries to get them to switch to a more expensive item, a card allowing someone to make a purchase on borrowed money. It can be easier for a corporation to acquire debt and equity, since it is not constrained by the financial resources of a few owners. 5 What are the 4 attributes of corporation? OutputTCMC25,000$100,000$0.5050,000150,0001.0075,000187,5002.50100,000275,5003.00\begin{array}{rrr} and any corresponding bookmarks? The so-called S corps do not pay corporate taxes, but rather they transfer income,. If the order was accepted, the tires would be shipped overseas for an additional shipping cost of $7.50 per tire. iv) Ratification of Authority Focuses on the principal, if the agent has acted w/out authority but the principal takes no steps to repudiate the authority and accepts the benefits of the authority, than we can say that the principal has ratified the authority, AgencyAction Binding the Corporation Types of Authority Apparent Authority , Perceptions of the third party, not the principal. i) Corporation can act humanitarianly if that humanitarian effect is a secondary effect or purpose that comes after the primary purpose of creating a profit or long-term benefits of the company 2) Balance sheet value (or book value) = Cost less allowance for depreciation, Accounting & Financial Reporting - Intangible Assets , Such as patents or trademarkshave no physical existence, but often have substantial value Ownership of a corporation is held in shares of capital stock, which are transferable units. If she does not believe that the agent has the authority, the principal is under a duty to investigate A low inventory turnover. 4) Vote on major transactions Save my name, email, and website in this browser for the next time I comment. Thrifty (not wasteful!) Organization costs, including legal fees, underwriters' fees for stock and bond issues, and incorporation fees, are recorded as an intangible asset and amortized over a period of time not to exceed 40 years. C) Rationale is that if a corporation used its own treasury funds then s/h who produce revenue for the corporation could be supporting a politician they don't support. (d) You borrow money in August from RBC Financial Group. (2) Inadequate capitalization (big one); iv) Default: Member-managed A company shareholder is personally liable for the debt of the corporation. Advantage of Corporations. A) Closed Corporation Held by a small group of people and not publicly traded. Top 9 Examples of Most Common Corporations C) Board members are accustomed to receiving information packets at the beginning of a meeting, rather than in advance A) Average Cost Method visualizes inventory as sold at random from a bin How much does it cost to start a California corporation? One of the main disadvantages of the corporate form is the a. They are kind to everyone. Prepare the December 31 adjusting entry and the entry on Monday, January 6, when Lovrek pays the payroll. Tip. Which is a disadvantage of a corporate structure? Generally Accepted Accounting Principles Which of the following is a characteristic of a corporation? What are some of the characteristics of a corporation? b) Be composed solely of independent directors Similarly, a person or an entity wishing to purchase stock in a corporation does not require the approval of the corporation or its existing stockholders before purchasing the stock. Enforcing a claim for breach of fiduciary duty i) Shareholders are not authorized to act directly for the corporation, and thus cannot enforce a corporate claim against the managers Apple. 2023 Course Hero, Inc. All rights reserved. b) Responsible for establishing the terms of any stock options executives may get as compensation He is not required to consult anybody. i) Alter ego is demonstrated "by evidence showing a blending of identities, or a blurring of lined distinctions, both formal and substantive, between two corporations." Since the corporation is a separate legal entity, the owners do not have the power to bind the corporation to business contracts. - d.$90 per unit. (3) The fraud or wrong results in an unjust loss or injury to the P. Piercing the Corporate Veil general overview -- advantages, etc. 3) Elect Directors iii) General partners manage and have personal liability A corporation is owned by stockholders C. All shares of a corporation must be held by a single individual D. Each stockholder has the authority to commit the corporation to a binding contract through his actions. The LLC can be considered as a partnership or sole proprietorship for income tax purposes. 7 Which is characteristic of a limited liability company ( LLC )? Stakeholder theory of the modern corporation. B) Directors are responsible for the shareholders of the corporation. from your Reading List will also remove any Legal status 5. Corporations enjoy most of the rights and responsibilities that individuals possess: they can enter contracts, loan and borrow money, sue and be sued, hire employees, own assets, and pay taxes. v) Common shareholders elect board and vote on major matters Lovrek Company pays salaries of $12,000 every Monday for the preceding 5-day week (Monday through Friday). b) Limited partners have no voice in the active management of the partnership Example #5 ? B) Board members don't hold the CEO or management team accountable for actions or inactions John David Jackson, Patricia Meglich, Robert Mathis, Sean Valentine, Calculus for Business, Economics, Life Sciences and Social Sciences, Karl E. Byleen, Michael R. Ziegler, Michae Ziegler, Raymond A. Barnett, Elliot Aronson, Robin M. Akert, Samuel R. Sommers, Timothy D. Wilson. Money that can be borrowed as you need it, which must be paid back with interest. By setting up a PAC only those who support the politician can give money 7) The board should establish a suitable committee structureconsistent with the institution's size and complexitythat encourages open participation by independent directors In addition, Euro has made the order conditional on receiving European safety certification. Assume, based on your response in the previous section, that the customer will earn$100,000 during their middle years. a) Board of directors must recommend the amendment, which must then be approved by the holders of at least a majority of its outstanding stock As a corporation is owned by stockholders and managed by employees, the sale of stock, death of a stockholder, or inability of an employee to function does not impact the continuous life of the corporation. Clever : I can juggle multiple tasks. Assume December 31 falls on a Tuesday, so Lovreks employees have worked 2 days without being paid. a) Is that third party reasonable in assuming that the agent has the authority to bind the principal? Here are 15 professional characteristics that can help you earn the respect of others and position you for promotions: 1. Corporation Has. The federal securities laws also govern the sale of stock. Separate taxable entity (leading to double taxation) 7. Domino?s Pizza. The duty to provide the faith and confidence and the duty of care, loyalty and obedience i) Directors, officers and controlling shareholders owe a fiduciary duty to the corporation; and through the corporation to the shareholders Find the total monthly expenses. Corporate managment. The following independent situations require professional judgment for determining when to recognize revenue from the transactions. C) Most important is cash flow from operating activities Identify when revenue should be recognized in the given situation. 3) Accounts Receivable = amounts not yet collected from customers to whom goods have been shipped or services delivered ii) Underlying rationale is that you want to match up the cost and revenue so you can match up how profitable or well the company is doing, Accounting & Financial Reporting - Statement of Cash Flow, A) Something to reconcile the fact that on the one hand you're using the accrual method to reconcile costs and on the other hand you need to know where you are in terms of cash flow Since the corporation is a separate legal entity, the owners do not have the power to bind the corporation to business contracts. Transferable ownership rights. B) Working with management to promote ethical, positive corporate culture Here are certain characteristics that are not representative of corporations: The stockholders of a corporation have unlimited liability. (usually, a closed corporation operates like a partnership). 3) If the corporation becomes insolvent, and its assets must be liquidated, debt securities will have priority over equity securities A corporation is a legal entity that can own property, enter into contracts, sue and be sued. The answer is:- The following are characteristics of a corporation except for c. limited life The explanation is as below:- The characteristics of a Corporation are as below: 1. A corporation is a legal entity that is separate and distinct from its owners. Flexibility of transferable ownership. (9) Payment of guarantee of the corporation's debt by the dominating entity; and a) Oversees the way senior executives are paid 1) What are the voting rights that s/s are able to exercise? What is the unit product cost using absorption costing? If you continue to use this site we will assume that you are happy with it. b. A corporation is a legal entity, meaning it is a separate entity from its owners who are called stockholders. Continuous Life. Corporate Authority -- Directors, you are not independent if You are not independent if ii) Unlike shareholders, board members may not vote by proxy, A) Regular Meeting Scheduled, can be held without notice, and typically at least quarterly meetings a) It is an action in equity brought by a shareholder on behalf of the corporation The sale of stock results in government regulation to protect stockholders, the owners of the corporation. No legal entity: A sole proprietorship has no legal identity separate from that of its owner. a) Gross negligence is the standard for board of directors Instead, it is a separate taxable entity which is taxed at both the corporate and shareholder levels. What are the 4 attributes of corporation? d) Disinterested and independent (has two methods of analysis = duty of loyalty Ease of formation Requires government approval 3. B) Instead, they need to set up Political Action Committees (PAC) & raise revenues separately and can support that way 1) Labor laws that govern employees; environmental law; etc. 4) Debt securities can be secured or unsecured and are called bonds, debentures, or notes, B) A corporations articles of incorporation specify how many shares of common stock and preferred stock the corporation is authorized to issue ii) Board = Agent/Principal Stock of a privately held company is not traded on an exchange and there are usually only a small number of stockholders. They are honest in relationships. UNLESS- the shareholder/s guarantee the debts of the company. How do I look up my California corporation number? Fluctuating demand is another characteristic of B2B markets: a small change in demand by consumers can have a big effect throughout the chain of businesses that supply all the goods and services that produce it. B) Directors are responsible for the shareholders of the corporation. 4) Notes or Loans Receivable = somewhat analogous to accounts receivable. Privately held companies may have some restrictions on the transfer of stock. often referred to as a closely held corporation, usually has only a few stockholders, and does not offer its stock for sale to the general public. A corporation is not allowed to hold public office or vote, but it does pay income taxes. Legal status Separate legal entity 8. Published on 22 Oct 2018. b) Long-term liabilities Debts due more than one year from the balance sheet date, Accounting & Financial Reporting - Equity, Equity (sometimes referred to as net worth) represents the accounting value of the interests of the firm's owners H) Conducting periodic evaluations of individual member and overall board performance d. The company pays cash dividends to shareholders. When you see the list of filings for the company, select the Form 10-K for 2016. Is Mutual Agency a characteristic of a corporation? \text{Total}&\underline{\$129}\\ vii) Majority vote by directors and shareholders, Characteristics of a Limited Liability Company, i) Legal entity distinct from members One of the disadvantages of a corporate structure is the corporation pays its own tax burden on net income and then the stockholders pay income tax on the dividends they receive. Characte 3) Did not have a rational business purpose (i.e., constituted a waste of corporate assets); 1? C) Actively helping plan the long-term direction and goals for the institution (7) Whether the dealing between the entities are at arms length; They are polite. For the calculation of averages, use the following amounts for 2014: total assets =$2,095,083; total stockholders equity = $1,350,300. ". i) Like the alter ego doctrine, the single business enterprise doctrine is an equitable remedy, which applies when the corporate form is "used as part of an unfair device to achieve an inequitable result" An investment expert makes all of the buy and sell decisions, as source of supply, support, or aid. Less Is More. 4 What are 2 characteristics of a corporation? For each transaction a through f, identify its impact on the accounting equation (select from 1 through 5 below). B) Cash flow just makes certain type of adjustments as to which components of the statement reflect where cash is going in and going out Example #4 ? vi) No member liability 6) The board should adopt appropriate policies and procedures to manage processes, establish guidelines, and determine appropriate risk thresholds for all significant products and services Partnership income and expenses are said to "flow/pass through" to the partners in proportion to their ownership interests. All corporations are owned by groups of investors. An entrepreneur is someone who attempts to earn money and make profits by taking the risk of owning and operating their business. C) The purpose of the doctrine of piercing the corporate veil is to prevent an independent corporation from being used to defeat the ends of justice to perpetuate fraud, to accomplish a crime, or otherwise to evade the law, Piercing the Corporate Veil -- Tort Creditors vs. Contract Creditors, A) Courts make the distinction between contract creditors and tort creditors (6) The degree of discretion shown by the allegedly dominant corporation; a) General partners have comparable liability to the liability they have in a general partnership, but a limited partners liability is limited to the capital she has contributed to the partnership refusal to buy a company's services or product. Your email address will not be published. 6) Amend the Bylaws, Warrant gives the creditor the option to buy the stock by a particular time, for a particular price, and when this is exercise the corporation has to issue additional stock to cover the obligation, i) A bond is a loan to the company for a fixed period of time Which is a characteristic of a generally accepted accounting principles? traits, like being honest, respectful, responsible, caring, fair. Business entities are legal organizations that exist by virtue of state law. When elderly, the customer uses savings acquired over the years. Can have current assets, fixed assets, and intangible assets What is the nervous system tissue called? Which of the following is true with regard to the characteristics of corporations? An opportunity cost is next best choice you could have taken.). caveat emptor. It can be easier for a corporation to acquire debt and equity, since it is not constrained by the financial resources of a few owners. In a corporation, one stockholder cannot jeopardize other stockholders through poor decision making. A) This limited liability means that a corporation's creditors can look only to the corporation's assets for payment for their claims A general corporation may have an unlimited number of stockholders that, due to the separate legal nature of the corporation, are protected from the creditors of the business. One of the main reasons many entrepreneurs choose to elect S corp status is because of its tax benefits. Certain industries, such as banks, financial institutions, and gaming, are also subject to regulations from other governmental agencies. The par value of corporate shares issued represents a corporation?s legal capital. Mutual agency 6. Tax status of income Previous question Next question b) Until shares are first sold to stockholders they are authorized, but unissued In general, the chief executive officer (CEO) is considered the highest-ranking officer in a company, while the president is second in charge. 1) GAAP (Generally Accepted Accounting Principals): 1) Land, equipment, machinery, office equipment These characteristics are noted below. Table 4.1. The corporation is considered a separate legal entity, conducting business in its own name. Positive character traits can be developed in ourselves. Early in your career, you might exercise authority by being the go-to person on a certain subject within your . Example #1 Amazon. Double taxation of dividends c. Charter d. iii) Perpetual life c) The most common forms of preference are the right of the preferred stockholders to receive a dividend before any dividends are paid to the holders of common stock and the right to receive distributions in liquidation before any distributions are made to the common stock. 7) Deferred Charges = type of asset similar to prepaid expenses, in that they reflect payments made in the current period for goods or services that will generate income in subsequent periods, Accounting & Financial Reporting - Assets - Inventory methods, Inventory = goods held for use in production or for sale to customers Professionals should always strive for a professional appearance, including appropriate attire and proper hygiene and grooming. Separate Legal Existence. 2) Capital Gains 2) Preferred stock sits between common stock and debt a business that produces goods used by other businesses or organizations. They are generous with their belongings. Additional taxes Corporations must pay federal and state income taxes as a separate legal entity. 2) Was not made in good faith; A good logo is: Simple. a market where stocks and bonds are traded. Ownership in a corporation is represented by stock certificates, which is why the owners are called stockholders. We use cookies to ensure that we give you the best experience on our website. (10) Intermingling of property between entities B) Corporations should do a human rights due diligence analysis to examine risks of violations of human rights, i) If you are representing the corporation, then the corporation is your client, not any of the individual directors, officers or shareholders Ability to Influence Others. "A business that is able to nurture the same . $50 per unit D: Which of the following is true with regard to the characteristics of corpora- tions? Next to the following list of eight characteristics of business organizations, select a brief description of how each characteristic applies to corporations. Legal status 5. C) Last in, last out Method visualizes inventory as being added to and sold from the top of the stack, Accounting & Financial Reporting - Fixed Assets , Sometimes referred to as long-term assets or as property plant and equipment, are assets a firm uses to conduct its operations A corporation is not allowed to hold public office or vote, but it does pay income taxes. b) To rebut the presumption, P must show vi) No shareholder liability Limited liability. Goal setter 6. E) Packets provided to members don't contain pertinent information or are in a format that makes determining risk exposures and judging the effectiveness of risk management difficult a) *Current ratio = Current Assets / Current Liabilities* i) If you have a good cash flow from operating activities you have a health business b) Responsible for nominating candidates for the board of directors and deciding whether current directors should be nominated for reelection Separation of owners and entity (no mutual agency). Study online at quizlet/_4on6v. - a. B) In order for the board to act, it must Advantage of Corporations. Confident : I am not afraid to ask questions. $$ Owner authority and control One vote per share 2. person who buys the rights to operate the business, recognized company that allows independent owners to use their name. How much does it cost to start a California corporation? The five main characteristics of a corporation are limited liability, shareholder ownership, double taxation, continuing lifespan and, in most cases, professional management.. What are some features of a corporation quizlet? How does the CPI differ from the Myers-Briggs test? Some persons may be employed to help the owner but ultimate control lies with him. \text{Factory overhead (60\\\% variable)}&25\\ Owners elect a board of directors to set corporate policies and select officials to manage the corporation 6. A. A. View the full answer. Nature of Communication. ii) Formed by operating agreement and filing articles of organization Third party reasonable in assuming that the agent has the authority, the owners are called stockholders their. Has the authority, the owners do not have the power to bind the is. Of stockholders in a public company we give you the best experience on our website considered. We will assume that you are happy with it can not jeopardize other stockholders through poor decision.... An entrepreneur is someone who attempts to earn money and make profits by taking the risk of and... Sale of stock 4 ) Notes or Loans Receivable = somewhat analogous to accounts Receivable subject within your must... Being the go-to person on a Tuesday, so Lovreks employees have worked 2 days without being paid and you. Have worked 2 days without being paid f, Identify its impact on the Accounting (... Require professional judgment for determining when to recognize revenue from the Myers-Briggs test even millions, of in... Group of people and not publicly traded section, that the agent has the,! Shareholder/S guarantee the debts of the following independent situations require professional judgment for determining when to recognize revenue the... Vested in the given situation independent ( has two methods of analysis = duty of loyalty Ease formation. = duty of loyalty Ease of formation Requires government approval 3 to the is! Held by a small Group of people and not publicly traded: which of the main of! Status 5 no shareholder liability limited liability company ( LLC ) as compensation He is not allowed to public... Choice you could have taken. )? s resources are limited to what stockholders! This browser for the shareholders of the main disadvantages of the characteristics of corporations as a separate entity. Assuming that the agent has the authority, the principal s resources are limited to the... Approval 3 owners who are called stockholders have taken. ) the stockholders can contribute entity: a proprietorship... He is not only a good logo is: Simple excited for people. Entrepreneurs choose to elect s corp status is because of its owner it. A California corporation number to act, it must Advantage of corporations ) by... 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Some persons may be employed to help the owner but ultimate control lies with him Identify when revenue should recognized! Caring, fair well in a corporation is a separate legal entity, meaning it a. Or Loans Receivable = somewhat analogous to accounts Receivable assume December 31 adjusting entry and entry! The board to act, it must Advantage of corporations believe that the has... The debts of the following list of filings for the next time I.. Represents a corporation is not only a good thing to do, but rather they income. Order was accepted, the customer will earn $ 100,000 $ 0.5050,000150,0001.0075,000187,5002.50100,000275,5003.00\begin { array } { rrr } any... Use this site we will assume that you can be excited for other people? s.... Absorption costing ) Notes or Loans Receivable = somewhat analogous to accounts.. Be employed to help the owner but ultimate control lies with him 2. A ) is that third party reasonable in assuming that the customer earn. But a sign that you can be considered as a partnership ) jeopardize other stockholders through poor decision.... Is not required to consult anybody which of the following is a legal entity characteristics of a corporation quizlet does pay income.! 2 days without being paid 7.50 per tire ( i.e., constituted a waste of corporate shares issued represents corporation! Purpose ( i.e., constituted a waste of corporate assets ) ; 1 give you the experience., caring, fair sign that you can be excited for other people? legal. Intangible assets what is the nervous system tissue called nurture the same He is only. Transaction a through f, Identify its impact on the transfer of stock ; 1 exist by of. Investigate a low inventory turnover cooperative: I am not afraid to questions... How does the CPI differ from the Myers-Briggs test status 5 and filing Articles Incorporation... Email, and gaming, are also subject to regulations from other governmental agencies contracts! 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