Chapter 20 - Corporations : Formation and Capital Stock Transactions Flashcards
FORMING A CORPORATION
corporate charter
- a document issued by a state government that establishes a corporation
FORMING A CORPORATION
shareholder or stockholder
- a person who owns shares of stock in a corporation
FORMING A CORPORATION
Advantages of the Corporate Form
- Limited liability
- Restricted agency
- Continuous expense
- Transferability of Ownership Rights
- Ease of Raising Capital
FORMING A CORPORATION
Disadvantages of the Corporate Form
- Corporate Income Tax
2. Governmental Regulation
FORMING A CORPORATION
Subchapter S corporations
- an entity formed as a corporation that meets the requirements of Subchapter S of the Internal Revenue Code to be treated essentially as a partnership, so that the corporation pays no income tax
- advantages : owners have limited liability and avoid double taxation
FORMING A CORPORATION
limited liability partnership (LLP)
- a partnership that provides limited liability for all partners
FORMING A CORPORATION
Limited liability companies (LLC)
- provides limited liability to the owners, who can elect to have the profits taxed at the LLC level or on their individual income tax returns
FORMING A CORPORATION
bylaws
- the guidelines for conducting a corporation’s business affairs
FORMING A CORPORATION
stockholders’ equity
- the corporate equivalent of owners’ equity; also called shareholders’ equity
TYPES OF CAPITAL STOCK
authorized capital stock
- the number of shares authorized for issue by the corporate charter
TYPES OF CAPITAL STOCK
par value
- an amount assigned by the corporate charter to each share of stock for accounting purposes
TYPES OF CAPITAL STOCK
stated value
- the value that can be assigned to no-par-value stock by a board of directors for accounting purposes
TYPES OF CAPITAL STOCK
market value
- the price per share at which stock is bought and sold
TYPES OF CAPITAL STOCK
common stock
- the general class of stock issued when no other class of stock is authorized; each share carries the same rights and privileges as every other share. Even if preferred stock is issued, common stock will also be issued
TYPES OF CAPITAL STOCK
preemptive right
- a shareholder’s right to purchase a proportionate amount of any new stock issued at a later date
TYPES OF CAPITAL STOCK
preferred stock
- a class of stock that has special claims on the corporate profits or, in case of liquidation, on corporate assets
TYPES OF CAPITAL STOCK
liquidation value
- value of assets to be applied to preferred stock, usually par value or an amount in excess of par value, if the corporation is liquidated
TYPES OF CAPITAL STOCK
convertible preferred stock
- preferred stock that conveys the right to convert that stock to common stock after a specified date or during a period of time
TYPES OF CAPITAL STOCK
callable preferred stock
- stock that gives the issuing corporation the right to repurchase the preferred shares from the stockholders at a specific price
TYPES OF CAPITAL STOCK
dividends
- distributions of the profits of a corporation to its shareholders
- usually paid on a quarterly basis
TYPES OF CAPITAL STOCK
cumulative preferred stock
- stock that conveys to its owners the right to receive the preference dividend for the current year and any prior years in which the preference dividend was not paid before common stockholders receive any dividends
TYPES OF CAPITAL STOCK
noncumulative preferred stock
- stock that conveys to its owners the stated preference dividend for the current year but no rights to dividends for years in which none were declared
TYPES OF CAPITAL STOCK
nonparticipating preferred stock
- stock that conveys to its owners the right to only the preference dividend amount specified on the stock certificate
TYPES OF CAPITAL STOCK
participating preferred stock
- stock that conveys the right not only to the preference dividend amount but also to a share of other dividends paid
RECORDING CAPITAL STOCK TRANSACTIONS
organization costs
- the costs associated with establishing a corporation
RECORDING CAPITAL STOCK TRANSACTIONS
no-par-value stock
- stock that is not assigned a par value in the corporate charter
RECORDING CAPITAL STOCK TRANSACTIONS
minute book
- a book in which accurate and complete records of all meetings of stockholders and directors are kept
RECORDING CAPITAL STOCK TRANSACTIONS
stock certificate
- the form by which capital stock is issued; the certificate indicates the name of the corporation, the name of the stockholder to whom the certificate was issued, the class of stock, and the number of shares
RECORDING CAPITAL STOCK TRANSACTIONS
capital stock ledger, also called stockholders’ ledger
- a subsidiary ledger that contains a record of each stockholder’s purchases, transfers, and current balance of shares owned
RECORDING CAPITAL STOCK TRANSACTIONS
capital stock transfer journal
- a record of stock transfers used for posting to the stockholders’ ledger
RECORDING CAPITAL STOCK TRANSACTIONS
subscription book
- a list of the stock subscriptions received
RECORDING CAPITAL STOCK TRANSACTIONS
subscribers’ ledger
- a subsidiary ledger that contains an account receivable for each stock subscriber
RECORDING CAPITAL STOCK TRANSACTIONS
transfer agent
- a person or institution that handles all stock transfers and transfer records for a corporation
RECORDING CAPITAL STOCK TRANSACTIONS
registrar
- a person or institution in charge of the issuance and transfer of a corporation’s stock
