INTRODUCTION TO CORPORATION ACCOUNTING

Corporation – an artificial being created by operation of law having the rights of succession and the power, attributes and properties expressly authorized by law or incident to its existence.

Characteristics of a Corporation

1. Separate legal entity – A corporation is an artificial being with a personality separate from that of its individual owners.

2. Created by operation of law – A corporation is generally created by operation of law. The mere agreement of the parties cannot give rise to a corporation.

3. Rights of succession – A corporation continues to exist notwithstanding the withdrawal, death, insolvency or incapacity of the individual owners. Changes in the ownership structure do not dissolve a corporation.

4. Powers, attributes, properties expressly authorized by law – Being a creation of law, a corporation can only exercise powers provided by law and powers which are incidental to its existence.

5. Ownership divided into shares – Proprietorship in a corporation is divided into units known as shares of stocks.

6. Board of Directors (BOD) – Management of the business is vested in a board of directors elected by the stockholders. The BOD is the governing body or decision-making body of the corporation.

Comparison between Partnership and Corporation
Partnership|Corporation|
Formed by 2 persons.|Formed by 5 persons|
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Starts with agreement among partners; may be formed orally.|Starts with the issuance of a certificate of incorporation issued by SEC|
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Unlimited liability|Limited liability|
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Limited life|Unlimited life|
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Transfer of equity of a partner needs the consent of other partners.|Shares can be transferred from one shareholder to another without getting the consent of the other shareholders.|
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Partner is an agent of the partnership.|Shareholders do not act as agents