Organizational structure of corporation

Presentation

Topic

Different aspect of corporation.

Presented to:

Miss Raheela

Presented by:

Naila, Iqra, Saira,Saba

CORPORATION

Corporation is a type of business, which means a legal entity that is separate and distinct form of its owner.

Explanation

Corporations must have at least one owner. The owners are called shareholders or stockholders. The ownership interests of the shareholders in a corporation are divided into units called stock, shares, or shares of stock. The rules governing corporations along with the advantages and disadvantages apply equally to corporations owned by one or more than one shareholder.

Advantages

Owners have limited liability. It can exist with continuity. Shares of ownership are transferable. It attracts more investors. You can be employee of your own corporation. The corporation pays its own tax.

Disadvantages

Incorporation is costly. It is not easy to dissolve. It may result to double taxation. Corporations are highly regulated. Limited liability may discourage the

creditors.

ORGANIZATINAL STRUCTURE OF CORPORATION

Organizational Structure of Corporation

Board of Directors and Officers' Role in a Corporation

The Employee's Role in a Corporation Shareholders or Owners' Role in a

Corporation

Stock holders

Board of holders

President

Treasure or vice

president

Controller

Vice president

(sales)

Vicepresident(productio

n)

Vice president(personn

el)

Organizational structure of corporation

Board of Directors and Officers' Role in a Corporation

The primary responsibility of the board of directors is to protect the shareholders' investment.

They are elected by the shareholders for this reason.

The board of directors is responsible for drafting and amending the company by-laws and appointing committees as necessary.

The Employee's Role in a Corporation

Employees are those who make the business run.

They carry out the various tasks associated with the company's mission. Employees report to the officers of the company.

Shareholders or Owners' Role in a Corporation

The shareholders own the corporation. This group routinely votes on election

and removal of directors, amending by-laws, major corporate changes.

The level of shareholder influence on the board of directors is one of many things to consider when forming a new corporation.

Right of Stock Holders

A shareholder or stockholder is an individual or institution (including a corporation) or person, that legally owns any part of a share of stock in a public or private corporation. Shareholders own the stock, but not the corporation itself.  

Stockholders are granted special privileges depending on the class of stock. These rights may include:

The right to sell their shares, The right to vote on the directors nominated by the

board, The right to nominate directors (although this is

very difficult in practice because of minority protections) and propose shareholder resolutions,

The right to dividends if they are declared, The right to purchase new shares issued by the

company, and The right to what assets remain after a liquidation.

The Functions of the Board of Directors

THE FUNCTIONS OF THE BOARD

OF DIRECTORS INCLUDE

Selecting, evaluating, and dismissing the chief executive officer (CEO) Reviewing and approving the corporation's financial objectives and strategy, the annual budget, and the business plan Providing advice to senior management

Selecting and recommending candidates for the board of directors to shareholders for election; Approving dividends and stock splits;

Ensure the safe preservation of the books and records Designate a safe depository for surplus funds and investment…….and

Reviewing the adequacy of systems to conform to applicable laws and regulations.

Owners Equity in Corporation

Owner’s Equity is represented in Balance sheet

In Corporation type business owner’s equity is called stock holders equity. The equity of each stock holder is not shown in balance sheet. This clearly would not be possible as large corporation often have several million individual stockholders.

Stock holder’s equity is subdivided into two categories

1) Capital Stock 2) Retained Earnings

Capital stock represents the amount which the stock holders originally invested in the business in exchange for shares of the company’s stock.

Retained earnings Retained earnings are the earnings the corporation generates but does not distribute to shareholders.

Retained Earnings AND

Capital Stock

Retained Earnings

The portion of stockholders,

equity resulting from profits earned and retained in the business. Retained earnings is increased by the earning of net income and is decreased by the incurring of net losses and by the declaration of dividends.

Example of Retained Earnings

If the net income of the year is $70,000,

the closing entry will be as follows:Income summary………………..70,000 Retained Earnings…………………………

70,000(To close the income summary account bytransferring the year’s net income into theRetained Earnings account).

If the company operates at a loss of ,say

$25,000, the income summary account will have

a credit balance . The account must then be

debited to close it such asRetained Earnings…………….25,000 Income

summary………………….25,000

Capital Stock

When stockholders invest cash in the business, the corporation issues to them in exchange shares of capital stock as evidence of their ownership. Capital invested by the stockholders is recorded in the corporation’s accounting records by a credit to an account entitled capital stock.

Capital stock is transferable unit of

ownership in a corporation. The stockholder has no restriction to sell his share.

Common stock: A type of capital stock which possesses

the basic rights of the ownership including the rights to vote. Represent the residual element of ownership in a corporation.

Preferred stock: A class of capital stock usually having

Preferences as to dividends and in the distribution of assets in event of liquidation.

Thank you for attention