Formation of Corporations and Stocks Essay

* 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? Corporations are created in order to separate the businesses finances from the person’s individual finances so that they can protect themselves financially. The advantages of forming a corporation are that the business can obtain the credibility so that consumers are more comfortable. Since consumers normally prefers to do business with a corporation. Also by forming a corporation the person protects their assets and name by forming a corporation. The disadvantages are that the process is lengthy and pricey. Also corporations often end up paying more in taxes. Corporations are also monitored very closely and must be in compliance with several entities. * 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? Preferred stock is considered preferred because it has dividend preference over common stock. Preferred stockholders have the right to receive dividends before common stockholders. The per share dividend amount is stated as a percentage of the preferred stocks per value or as a specified amount. Preferred stockholders must ne paid their annual dividend plus any dividends in arrears before common stockholders receive any dividends. I would select referred stock over common stock because I want to get paid as quickly as possible. * 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 There are four types of dividends: 1. cash dividends, 2. property dividends, 3. scrip (note), and 4. stock dividends. A corporation should pay dividends when it has retained earning, adequate cash, and a declaration of dividends. I would prefer a cash dividend. If the corporation issues stock, they are not having to spend actual cash. I want to be reassured that the business actually has my money. I have seen it too many times where huge corporations lie and cheat on paper. I also do not really like the stock market and never have been good at buying, selling, or owning stock.