CPA #1 Notes
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This 3 page Class Notes was uploaded by Callie Lusk on Monday August 29, 2016. The Class Notes belongs to FIN 330 at Western Kentucky University taught by Rhoades in Fall 2016. Since its upload, it has received 37 views. For similar materials see Print of finance management in Finance at Western Kentucky University.
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Date Created: 08/29/16
Finance 330 Exam #1 Preparation Material from CPA #1 What is Finance? Finance is divided into two branches: o managerial finance (sometimes broken into “corporate finance” and “public finance”) key role in every business organization and every governmental organization How to raise funds for the business operations, cash management, budget formulation and budget controls, cost controls, strategic planning, and much more. o personal financial services assisting individuals with financial planning Including but not limited to: investment planning, tax planning, retirement planning, estate planning, and insurance and risk management. What are the Business Organizations? There are several forms of business organizations. These include: o Sole proprietorships A business owned by one person who operates for his/her own profit. Account for about 60% of all businesses Known as a “pass-through” entity; they typically do not pay income tax. o Partnerships Consists of two or more owners doing business together for profit. Account for 7% of all businesses. Known as a “pass-through” entity; they typically do not pay income tax. o Limited partnerships o Limited Liability Companies o Corporations An entity created by law Make up 80% of businesses. Two major types of corporations: “C” and “S” “C” corporations file corporate tax returns and pay taxes at corporate tax rates. They are subject to both federal and state income tax rates. The shareholders of “C” corporations only pay taxes upon dividend distributions or when they sell their shares. “S” corporations are pass-through entities because the business owners are required to file and pay taxes on personal return, but they typically do not pay income tax. Note: if the company does not pay dividends, shareholders will still pay tax. There are no more than 100 individual shareholders allowed in “S” corps. More about Corporations: Corporate governance structure includes: o Shareholders elect the Directors; sometimes called upon to approve major actions Seek return on investment, which comes from dividends that are paid by the corporation as well as price appreciation in the value of the corporation’s shares. o Directors set the policy for the corporation; hire the CEO; review the finances of the corporation in an oversight function o Officers responsible for the day-to-day operations of the company C-Corporation Tax Bracket o Federal Income Tax Bracket looks like this: $0-50k 15% tax rate $50k-75k 25% $75k-100k 34% $100k-335k 39% 335k-10M 34% $10M-15M 35% $15M-18.33M 38% $18.33M+ 35% o Kentucky “C” corporation tax bracket has a 4% tax rate for net income up to $50k, 5% tax rate for $50k-$100k, and a 6% tax rate for anything over $100k. Why Delaware? Many corporations choose to incorporate in Delaware for the following reasons: o Cheaper startup cost for corporations o More flexible laws o Court of Chancery: no jury, only judge. o Tax advantages and quicker formation processes.
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