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Group 7

Group Members:
Christian S. Valdez
Vince Louie B. Isidro
Jan Michael A. Carorocan
Kaye T. Paule

ASSIGNMENT 2: Basic Considerations of a Corporation

Instructions:

Format: Write your answers in complete sentences. Be clear and concise.


Each question should be answered in 3-5 sentences.

Submission: Submit a typed, double-spaced document printed on long bond


paper. Work in the same groups as for the Articles of Partnership assignment.
The paper will be presented in class on November 4, 2024. Citations: If you
use outside sources, list them at the end of the document.

Assignment Questions:

1. What is a corporation? Describe its primary purpose in business and how it


differs from other business structures, such as partnerships or sole
proprietorships.

A corporation is a distinct business structure providing limited liability to


shareholders, separating assets and liabilities from owners. It is a separate legal
entity, able to exist continuously and raise capital through stock sales. This allows
individuals to invest without risking personal assets.

2. Explain why a corporation is considered a separate legal entity. How does this
status benefit both the corporation and its shareholders?

A corporation is a separate legal entity with its own identity, distinct from its
shareholders. This allows the corporation to enter contracts, own property, and
be sued independently. Shareholders have limited liability, protecting their
personal assets from the corporation's debts or legal problems.

3. Outline the steps involved in forming a corporation. Briefly describe the different
types of corporations (e.g., C corporation, S corporation, nonprofit).
Creating a corporation involves selecting a name, filing articles of
incorporation, appointing a board and officers, issuing shares, and choosing
between C, S, or nonprofit status. Steps include ensuring name availability,
specifying structure, and managing operations.

4. Who typically owns a corporation, and how is it controlled? Explain the role of
shareholders, the board of directors, and corporate officers.

Shareholders own a corporation through purchasing stock, entitling them


to assets and profits. The Board of Directors, elected by shareholders, oversees
operations, sets goals, and makes decisions. Officers like CEO manage daily
operations, appointed by the board. Both have fiduciary duties to act in
corporation’s best interests.

5. Discuss limited liability and why it’s an essential consideration for corporate
shareholders. How does it protect personal assets?

In a corporation, limited liability protects shareholders from personal


liability for the company’s debts or legal issues. This is possible because the law
treats the corporation as a separate entity from its owners and managers,
ensuring that shareholders’ personal assets are not at risk in case of lawsuits or
insolvency.

6. Describe two ways corporations can raise capital. What are the potential
advantages and disadvantages of each?

Corporations can raise capital through equity financing, selling shares to


investors who become partial owners, without needing to repay the investment or
diluting future profits.

7. Explain the concept of corporate social responsibility (CSR). Why might CSR be
a significant consideration for modern corporations?

Corporate Social Responsibility (CSR) involves businesses going beyond


legal requirements to benefit society and the environment. It includes charity
support, environmental practices, and social advocacy. Modern corporations
prioritize CSR to show responsibility, connect with consumers, enhance
reputation, and attract socially aware customers.

8. What are some regulatory requirements that corporations must adhere to? Why
is compliance important?

Corporations face diverse regulatory requirements based on their industry


and location, including financial reporting, labor laws, environmental standards,
and taxation. Compliance is essential for transparency and accountability to
stakeholders.

9. Briefly compare the tax implications for corporations versus other business types.
Why might some businesses choose not to incorporate based on tax
considerations?

Corporations face double taxation, being taxed on profits as well as


shareholders being taxed on dividends and gains. This can lead to higher tax
burdens compared to other business types. Some businesses avoid
incorporating to reduce tax liability, as sole proprietorships and partnerships’
profits pass through to owners.

10. List two advantages and two disadvantages of forming a corporation.

Forming a corporation offers limited liability protection for owners and


easier access to capital. However, it comes with higher costs and complexity.
Double taxation may result in higher tax burdens for both the corporation and its
owners.

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