Characteristics of Corporations Stockholders (owners of corporation stock) Board of directors (elected by stockholders) 0 Officers (selected by board of directors) c11-6
C11 - 6 Characteristics of Corporations Officers (selected by board of directors) Board of Directors (elected by stockholders) Stockholders (owners of corporation stock)
Characteristics of Corporations Stockholders (owners of corporation stock) Board of directors (elected by stockholders) 0 Officers (selected by board of directors) Employees (hired by officers c11-7
C11 - 7 Characteristics of Corporations Employees (hired by officers) Officers (selected by board of directors) Board of Directors (elected by stockholders) Stockholders (owners of corporation stock)
Forming a corporation First step is to file an application of incorporation with the state Because state laws differ, corporations often organize in states with more favorable laws ore than half of the largest companies are incorporated in Delaware. State grants a charter or articles of incorporation which formally create the corporation Management and board of directors prepare by laws which are operation rules and procedures c11-8
C11 - 8 Forming a Corporation First step is to file an application of incorporation with the state. Because state laws differ, corporations often organize in states with more favorable laws. More than half of the largest companies are incorporated in Delaware. State grants a charter or articles of incorporation which formally create the corporation. Management and board of directors prepare bylaws which are operation rules and procedures
Forming a Corporation Cost of organizing includes legal fees, taxes and licenses, promotion costs, etc. These costs are recorded as an intangible asset. Date Description Debit Credit Jan 5 Organization Costs 8,500 Cash 8.500 Paid organization costs of $8, 500. Dec31 Amortization Expense 700 Organ ization Costs 1700 Amortization of organization costs over 5 years. $83500 costs/5 years=$1,700 c11-9
C11 - 9 Date Description Debit Credit Forming a Corporation Organization Costs 8,500 Cash 8,500 Amortization Expense 1,700 Organization Costs 1,700 $8,500 costs / 5 years = $1,700 Jan. 5 Paid organization costs of $8,500. Amortization of organization costs over 5 years. Dec. 31 Cost of organizing includes legal fees, taxes and licenses, promotion costs, etc. These costs are recorded as an intangible asset
Stockholders' Equity Liabilities Assets Stockholders Equity Stockholders'Equity Assets-Liabilities Represents the stockholders share of the total assets c11-10
C11 - 10 Stockholders’ Equity Assets Liabilities Stockholders’ Equity Stockholders’ Equity = Assets – Liabilities Represents the stockholders’ share of the total assets