…Defining and Understanding the Corporation and Its Accounting

…Defining and Understanding the Corporation and Its Accounting

December 7, 2016

…Corporations may also choose to issue stock dividends if their cash is unavailable or needed elsewhere. Stock dividends give a shareholder a larger claim in the company. Another option is to issue a stock split, which is often used to attract more investors by lowering the price (splitting the stock). Such interest in the shares will hopefully push the stock price back up, resulting in profit for those who held shares before the split.

In basic terms, a business incorporates to limit liability and generate cash. Its main goals are to make a profit and increase the stock price, satisfying the shareholders desire for return on their investment and allowing them to issue dividends along the way.

To go into further details about the options and advantages in a corporation, study the accounting methods. For simple layouts and explanations, the book “Accounting for Non-Accountants” by Wayne Label is an excellent resource. To get more in depth on this topic, follow Dr. Label’s blog on his website or contact him directly at his email. Decide whether incorporation is right for your small business.

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