Corporation

an artificial being created by operation of law having the right of succession and the powers, attributes and properties
expressly authorized by law or incident to its existence.

Advantages Disadvantages
1. Limited Liability 1. Complicated in formation
2. Transferability of shares 2. Greater degree of government control and supervision
3. Continued life existence 3. Centralized management
4. Greater source funds 4. Heavier income tax

Kinds of Corporation
1. Stock Corporations issued shares of stock to the shareholders
2. Non-Stock Corporations do not issue shares of stock bec. they are created for civic, charitable or religious purposes

Component of Corporation
1. Incorporators also called the founders of a corporation. The law requires that incorporators must consist of at least 5 but not
more than 15
2. Corporators represents the several classifications of owners of corporation after its formation. Specifically corporators are
incorporators and shareholders and or members of the corporation.
3. Shareholders or members owners of a corporation.
4. Subscribers are those who have made an agreement with the corporation to buy share of stock at future payments.

Articles of Incorporation
basic instrument by which a corporation is formed under the corporation statutes, executed by several persons as
incorporators.

By- Laws
the regulations, ordinances, rules or laws adopted by any association or corporation for its government.

Stock certificate or share certificate
Evidence of the shareholders ownership interest in a corporation.

Accounting for Share Capital

Corporations Partnerships Sole Proprietorship
1. Owners Several (at least 5) 2 or more one
2. Ownership Account Shareholders Equity Partners Capital Owners Capital
3. Equity section of Balance Sheet Partners Equity Owners Equity
4. Income summary close to Accumulated
Profits/Losses (Retained
Earnings
Partners Capital Owners Capital

Share Capital (Capital Stock)
- the share capital subsection of shareholders equity consists of the following elements:
1. Share Capital refers to the paid in capital representing the amount of the total par or stated value of the shares issued. It
represents the portion of authorized share capital that has been fully paid. The share may be par value share or no par but
with stated value
2. Subscribed share capital the portion of share capital that investor agreed to purchase.
3. Subscriptions receivable unpaid portion of the subscribed shares.
4. Treasury shares this represents issued shares reacquired by the issuing corporation.

Major Classifications of share capital
1. Ordinary share (common stock) represents basic interest of ownership in a corporation.
2. Preference share (preferred stock) preference with respect to dividends and/or assets over ordinary shares.
Classifications of preference share capital
a. Cumulative preference shares the right to receive dividend in arrears (undeclared dividend in previous years)
b. Non-cumulative preference shares the right to receive dividend in arrears is lost.
c. Participating preference shares the right to receive additional dividend after the dividend for both ordinary shares and
preferred shares are paid.
d. Non-participating not entitled to receive additional dividend only the dividends declared during the current year.
e. Convertible preference shares holders are given the option to convert the preference share into ordinary shares.
f. Redeemable or callable preference shares issued preference shares can be bought back by the issuing corporation.