Chapter 1

The Corporation

Chapter Outline
1.1 The Four Types of Firms 1.2 Ownership Versus Control of Corporations 1.3 The Stock Market

Haithem MARZOUKI.

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1.1 The Four Types of Firms

! ! ! ! Sole Proprietorships Partnerships Limited Liability Companies Corporations
! Formation of a Corporation ! Ownership of a Corporation

! Tax Implications for Corporate Entities

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Figure 1.1 Types of U.S. Firms

There are four different types of firms in the United States. As (a) and (b) show, although the majority of U.S. firms are sole proprietorships, they generate only a small fraction of total revenue, in contrast to corporations.
Source: www.bizstats.com
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Example 1.1 Taxation of Corporate Earnings

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Example 1.1 Taxation of Corporate Earnings

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Example 1.2 Taxation of S Corporation Earnings

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Example 1.2 Taxation of S Corporation Earnings

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1.2 Ownership Versus Control of Corporations

! The Corporate Management Team ! Ownership and Control of Corporations
! Principal-Agent Problem ! Corporate Bankruptcy

! Shareholder Activism and Voting Rights

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1.3 The Stock Market

! The Largest Stock Markets ! NYSE ! Nasdaq

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Figure 1.2 Worldwide Stock Markets Ranked by Two Common Measures

The 10 biggest stock markets in the world ranked (a) by total value of all domestic corporations listed on the exchange at year-end 2004 and (b) by total volume of shares traded on exchange in 2004.
Source: www.world-exchanges.org
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