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Corporations, stocks, and dividends

I need assistance in answering these questions:

- Why does a company choose to form as a corporation? What are the steps required to become a corporation? What are the advantages and disadvantages of the corporate form of doing business?

- Why is preferred stock referred to as preferred? What are some of the features added to preferred stock that make it more attractive to investors? Would you select preferred stock or common stock as an investment? Why?

- Why do corporations buy back their own stock? What does it tell you about the corporation? What effect does the purchase have on the price of a company's stock?

- What are the different types of dividends corporations may issue? When should a corporation pay dividends? Do you prefer a stock dividend or a cash dividend? Why?

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Why does a company choose to form as a corporation? What are the steps required to become a corporation? What are the advantages and disadvantages of the corporate form of doing business?

-- Generally, when companies choose to form as a corporation, it's because they're looking to attract additional investors to gain needed capital. When forming a business, if the business needs to purchase assets, like machinery and vehicles, and the owners can't provide 100% of the capital needed through their own savings or through debt financing (bank loans), they will form a corporation. Investors are more likely to invest in a new business that is a corporation due to the protections that a corporation offers investors. To become a corporation, the owners need to file an articles of incorporation in the state where the main business operations (headquarters) will be located. After filing the articles of incorporation, the corporation needs to abide by the general laws and regulations for a corporation, including holding regular shareholder meetings. As part of forming the corporation, the owners also need to decide who will fulfill which positions within the company. The main advantage of a corporation is that there is no double taxation. The corp pays taxes on their profit, so the owners aren't personally responsible for paying taxes on the profit on their individual ...

Solution Summary

This solution describes the following concepts: how a company forms as a corporation, preferred stocks, prices of company's stocks, and dividends corporations.

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