Corporate Governance - Forms of Business Organization

9 important questions on Corporate Governance - Forms of Business Organization

Where is corporate governance concerned with?

CORPORATE GOVERNANCE is concerned with how firms manage themselves, and the way in which this performance is monitored.

What is a partnership?

A business is formed by two or more individuals or entities.

-General partnership: all partners share gains or losses and have unlimited liability for all partners
-  Limited partnership: one or more general partners will run the business and have unlimited liabilities. One or more limited partners that will not actively participate in business and liability is limited.

What is a partnership agreement?

The way partnership gains (and losses) are divided is described in the agreement. Can be oral or formal written document
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The primary disadvantages of sole proprietorships and partnerships as forms of business organization are:

1. Unlimited liability for business debts on the part of the owners
2. Limited life of the business
3. Difficulty of transferring ownership

What is a Corporation?

A business created as a distinct legal entity composed of one or more individuals or entities. (large corporations usually managers and shareholders form separate groups)

What does forming a corporation involves?

1. Preparing articles of incorporation (or a chart): Many things inc: name, intended life (which can be forever), business purpose, and the number of shares that can be issued.
For legal purposes the corporation is a 'resident' of that country.
2. Preparing a memorandum of association: rules describing how the corporation regulates its existence (how directors are collected)  can be amended or extended form time to time by shareholders

What is the difference between single-tier board and two-tier board countries?

Single-tier: shareholders select the board of directors, who then select the managers
Two-tier: two boards. The executive board manages the day-to-day operations of the
company, and they report to the supervisory board which monitors theirperformance

What are the disadvantages of a cooperation?

Double taxations: meaning that corporate profits are taxed twice: at the corporate level when they are earned, and again at the personal level when they are paid out.

Bc cooperation is a legal person and bc money is paid to shareholders in form of dividends against the income of those shareholders.

A corporate organization has different names around the world, what are these names?

1. joint-stock companies
2. public limited companies
3. limited liability companies 
4. depending on the specific nature of the firm and the country of origin

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