• You will hear five different business people talking about corporations.• For

M: Unlike partners and proprietors, owners in a corporation have limited liability. They stand to lose only what they have invested. Creditors can sue a corporation for not paying its debts, forcing the corporation to declare bankruptcy. Creditors, however, cannot make the stockholders pay the corporation’s debts out of their own personal assets. Because corporations have to report so many of their activities and because many government agencies scrutinize their activities, corporations often lose the competitive advantage of secrecy. Corporations must make public reports on profits,  total sales,  and research expenditures. Competitors can learn much about each other by reading reports and studying reports from hearings.
F: Stockholders can transfer shares of stock to others without causing the termination of the corporation.  Major stock exchanges list the latest selling price for thousands of stocks by the minute, and they provide a ready market for buyers and sellers. The withdrawal is easy compared to the other forms of ownership because the sale of an owner’s stock does not dissolve the corporation. A proprietor can have a brain-storm over a ham sandwich at lunch. Make a decision. And act on it before the end of  the  day.  But  corporations  have  many departments,  committees,  and  beards  that must approve major projects before actions can be taken.
M:  Unlike proprietorships and partnerships,  a corporation can last indefinitely. While some charters specify the length of life of the company, most assume an indefinite life span. The existence of the corporation is unaffected by the death or withdrawal of its stockholders. The government creates the corporation as an artificial being and feeds its offspring with dozens of rules and regulations. Many of these regulations apply  to  all  organizations,  but enforcement   is   focused   on   the   larger corporations. In order to comply with all the regulations, corporations spend a good deal interpreting laws,  maintaining records, and reporting to government agencies.
F: Corporations have a large advantage in obtaining more money for expansion.  They can raise money more easily because its stock and bonds are bought and sold in public markets such as stock exchanges. The price of ownership is known, and when the company wants to raise new funds, it can sell new shares or bonds to the public and attract funds from both domestic and foreign investors. The larger a corporation becomes, the more sources of financing are available to it. The corporation is treated as a legal entity and must pay taxes on its taxable income. When after-tax corporate profits are paid out in dividends to the stockholders, the dividends are taxed a second time as part of the individual owner’s income. Thus owners pay taxes twice on corporate profits.
M: While all corporations are not large, most large businesses are corporations. Large size offers the  advantage  of  economical  production methods; large companies can buy materials, manufacture products, and ship finished goods
in bulk. But even more important is the ability to specialize. This potential, combined with the ability to pay higher salaries and offer attractive fringe benefits, gives the corporation an advantage in hiring and keeping top-rate employees. A corporation is more costly and difficult  to  create  than  other  forms  of~ ownership.   Preparing   the   articles   of incorporation,  developing  a  prospectus  for potential owners, complying with regulations on stock issues, and registering in other states is costly and time consuming.  Filing fees, lawyer expenses, and promotion costs can be expensive.