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CH 3] Business 101 3-9

Illustration 3.2 Example of a Stock Certificate

3

Source: Courtesy of General Foods Corporation.

extent of his investment in the company or the value of the shares that he holds. If a
corporation enters into a default, then the share-holders personal assets cannot be
touched by the creditors of a corporation. The limited liability of corporate ownership
is clearly designated in the names used by firms throughout the world. U.S.
corporations will regularly use designation "Incorporated" or "Inc." Corporate
enterprises in Canada and the Great Britain use "Limited" or "Ltd." In Australia,
limited liability is shown by "Proprietary Limited" or "Pty. Ltd." This limited liability
is the most significant advantage of corporate ownership over other forms of
ownership.
Specialized management. Corporations, because of their financial resources, can
offer longer-term career opportunities for qualified people with specialized managerial
skills. In contrast to sole proprietorships and partnerships, this advantage of shared and
delegated workload allows a company to advance and grow to meet market demands.
Easier capital formation. Sole proprietorships and partnerships are limited to the
financial resources of the owners. The corporate structure allows an expanded
financial capability that assists a corporation as it grows and becomes more efficient.
Because corporate ownership is divided into many small units (shares), it is usually
easier for a firm to attract capital. People with large or relatively small resources can
invest their savings in a corporation by buying its shares of stock. Corporate size and
stability may make it easier for corporations to borrow additional funds.
Continuous existence. Because the corporation is a legal person, it is said to have
a continuous existence which addresses the issue of continuity that faces sole
proprietorships and partnerships. In both of those business forms, because there is no
legal distinction between the business and the owner, when an owner dies, the business
is, in the eyes of the state, also dead. By comparison, a corporations’ ownership is
represented by the shares of stock, and those owners are distinct from the business.
When a share-holder dies, it is merely his portion of the corporation that is subject to
inheritance taxation and the corporation keeps on keeping on.

Disadvantages of Corporations. The disadvantages associated with the corporate
form of ownership are inherent in the characteristic of corporations. The

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