Scenario:

Steve Osbourne is considering opening a business, but the major decision faced is how to organize the business. Steve anticipates generating a massive profit during the first year and that the following years should be relatively profitable. Although he has enough to start the business now as a partnership, he believes cash flow may be an issue as the company grows. Steve believes that the corporate form of operation will be his best option and have hired you as a consultant and seek your advice.

Requirements:

Scenario:

Steve Osbourne is considering opening a business, but the major decision faced is how to organize the business. Steve anticipates generating a massive profit during the first year and that the following years should be relatively profitable. Although he has enough to start the business now as a partnership, he believes cash flow may be an issue as the company grows. Steve believes that the corporate form of operation will be his best option and have hired you as a consultant and seek your advice.

Requirements:

1. Answer the following questions for Steve:

1. Explain the corporate characteristic termed no mutual agency.

2. Explain the corporate characteristic termed limited liability.

3. Explain the term outstanding stock.

4. Is it true or false that corporations muse issue common stock, but may or may not decide to issue preferred stock?

5. Is it true or false that all forms and classes of stock carry voting rights?

6. Is it true of false that stock sold for amounts in excess of par value results in a gain reported on the income statement?