Advantages and Disadvantages of a corporation-
* Separate legal entity
* Limited Liability
* Ease of capital generation
* Lack of mutual agency
* Continuous existence
* Centralized authority and responsibility
* Professional management
* Government Regulation
* Double taxation
* Limited Liability
* Separation of ownership and control
Advantages and Disadvantages of using common stock to finance your business- Advantages:
* Less risky than financing with bonds
* Dividends paid only on decisions by the board of directors * If the corp. does not pay the dividends, they can reinvest the cash * Can use the proceeds of stock issue to maintain or improve its debt to equity ratio Disadvantages:
* Dividends paid are not tax deductible. Interest or debt is tax deductible * Issuing stock dilutes ownership
How do you record the sale of common stock for cash?
How to record the issuance of common stock for noncash assets?
Different types and definition of shares of stocks:
* Authorized shares: Is the maximum number of shares that a corporation’s state charter allows it to issue. Most corporations are authorized to issue more shares than they need to issue more shares than they need to issue at the time they are formed. THUS, they are able to raise more capital more capital in the future by issuing additional shares. When a corporation issues all of its authorized shares, it cannot issue more without a change in its state charter.
* Issued Shares: are those that a corporation sells or otherwise transfers to stock holders. The owners of a corporation’s issued shares own 100% of the business. Unissued shares have no rights or privileges until they are issued.
* Outstanding shares: are shares that a corporation has issued and that are still in circulation. (Treasury stock is not outstanding because it consists of shares that a corporation has issued but that...
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