Answer to Question #208203 in Management for Cessy

Question

Identify at least six characteristics of the corporate form of business organization. Contrast each one with the partnership form of organization.

Answer 1

In its own name, a company can possess property, sue and be sued, contract to purchase and sell, and be punished. The owners are seldom compelled to pay the corporation's obligations. Their responsibility is restricted to the amount of money they have put into the corporation or have pledged to pay into it. Prevalent and preferred stock are the two most common forms of claims on a company's equity. In the case of the company's insolvency, preferred shareholders' claims take precedence over regular stockholders' equity rights. Dividends must be paid to preferred stockholders before other equity claims. Dividends paid to preferred stockholders are typically set sums paid at regular periods and rarely vary. Preferred stock usually has an accumulated preferred characteristic. This means that if the company fails to pay a preferred stock dividend, it will have to make up the difference to its preferred stockholders before continuing to make payments. A partnership is more easier to form compared to corporation. A Corporation is more complicated to form and administer compared to a partnership which can be easily be recognized as legal. In terms of taxation a partnership is taxed ordinary while a corporation is usually double taxed. It is not easy to change the ownership of a partnership as all the members have to agree while in a corporation it is easier to change ownership. A partnership has limited life while a corporation has unlimited life and there most suitable. It is easy to raise capital in a partnership because it can be formed by close friends compared to a corporation. A general partnership is a firm in which two or more people own and operate it. The partners invest in the company, share managerial responsibilities, and split any profits. Partnerships are generally formed by a formal agreement between the partners, but they can sometimes be legally recognized without one. The partnership agreement should be registered in the county where the property is situated if the partnership owns real property.