Chapter 11 Corporations Organization Stock Transactions Dividends and Retained Earnings Corporation is an entity that is separate from its owners Two ways to classify corporations are by purpose or ownership The Corporate Form of Organization Purpose For Profit Not For Profit Ownership Publicly held May have thousands of stockholders Traded on the national securities exchange Privately held Only has a few stockholders and does not have stock for sale for the general public Characteristics of a Corporation Separate Legal Existence Corporations act under their own name rather than their stockholders May buy own or sell property May sue or be sued and it pays its own taxes The acts of its owners stockholders do not bind the corporation unless the owners are agents of the corporation Limited Liability of Stockholders Creditors have recourse only to the corporate assets to satisfy their claims Liability of stockholders is only limited to their investment in the corporation Creditors have no legal claim to the personal assets of the owners unless fraud has occurred Transferable Ownership Rights Shares of capital stock give ownership in a corporation and the shares are transferable Stockholders may dispose of their interest in a corporation by selling their stock Transfer of a ownership of interest in a partnership requires the consent of each owner For a corporation the transfer of stock is entirely at the discretion of the stockholder and does not require the approval of either the corporation or the stockholders After a corporation issues the stock the company does not participate in transfers Continuous Life The life of a corporation is stated in its charter Life may wither be perpetual or be limited to a certain number of years Limited Company can extend the life through a renewal of the charter Perpetual Since a corporation is a separate entity from its owners it is not affected by the death of stockholders owners etc Corporation Management Stockholders legally own the corporation Manage the company through a BOD that they elect