In this chapter, you will be able to: Identify the primary characteristics of sole proprietorships, partnerships, and corporations; analyze financial statements to identify the different types of business organizations; explain the characteristics of major types of stock issued by corporations;. | Chapter Eight Proprietorships, Partnerships, and Corporations © 2015 McGraw-Hill Education. Corporate Advantages Separate legal Entity Limited liability of stockholders Continuous life Management Structure Easily transferable ownership rights Ability to raise capital Corporate Disadvantages Governmental regulation Corporate double taxation Comparing Corporations with Proprietorships and Partnerships 8-2 2 Appearance of Capital Structure in Financial Statements The ownership interest (equity) in a business is composed of: Owner/investor contributions. Retained earnings. 8-3 3 Legal capital is the amount of capital, required by the state of incorporation, that must remain invested in the business. Par Value Nominal Amount Legal capital Characteristics of Capital stock 8-4 4 Some states do not require a par value to be stated in the charter. No-par Stock Characteristics of Capital stock 8-5 5 Par value is an arbitrary amount assigned to each share of stock when it is authorized. Market | Chapter Eight Proprietorships, Partnerships, and Corporations © 2015 McGraw-Hill Education. Corporate Advantages Separate legal Entity Limited liability of stockholders Continuous life Management Structure Easily transferable ownership rights Ability to raise capital Corporate Disadvantages Governmental regulation Corporate double taxation Comparing Corporations with Proprietorships and Partnerships 8-2 2 Appearance of Capital Structure in Financial Statements The ownership interest (equity) in a business is composed of: Owner/investor contributions. Retained earnings. 8-3 3 Legal capital is the amount of capital, required by the state of incorporation, that must remain invested in the business. Par Value Nominal Amount Legal capital Characteristics of Capital stock 8-4 4 Some states do not require a par value to be stated in the charter. No-par Stock Characteristics of Capital stock 8-5 5 Par value is an arbitrary amount assigned to each share of stock when it is authorized. Market price is the amount that each share of stock will sell for in the market. Characteristics of Capital stock 8-6 6 Authorized, Issued, and Outstanding Capital Stock The maximum number of shares of capital stock that can be sold to the public. Authorized Shares 8-7 7 Authorized, Issued, and Outstanding Capital Stock Issued shares are authorized shares of stock that have been sold. Unissued shares are authorized shares of stock that never have been sold. Authorized Shares 8-8 8 Authorized, Issued, and Outstanding Capital Stock Unissued Shares Treasury Shares Outstanding Shares Issued Shares Treasury shares are issued shares that have been reacquired by the corporation. Outstanding shares are issued shares that are owned by stockholders. Authorized Shares 8-9 9 Common stockholders have the rights to: Buy and sell stock. Share in the distribution of profits. Share in the distribution of assets in the case of liquidation. Vote on significant matters that affect the corporate charter. .
