Accounting All-in-One For Dummies, with Online Practice, 2nd Edition

Chapter 1

Incorporating Your Business

IN THIS CHAPTER

Structuring the business to attract capital

Taking stock of the corporate legal structure

Issuing and managing stock shares

The obvious reason for investing in a business rather than putting your money in a safer type of investment is the potential for greater rewards. Note the word potential. As an owner of a business, you’re entitled to your fair share of its profit, as are the other owners. At the same time, you’re subject to the risk that it could go down the tubes, taking your money with it.

Ignore the risks for a moment and look at just the rosy side of the picture: Suppose the doohickeys that your business sells become the hottest products of the year. Sales are booming, and you start looking at buying a five-bedroom mansion with an ocean view. Don’t make that down payment just yet — you may not get as big a piece of the profit pie as you’re expecting. Some claims to that profit may rank higher than yours, and you may not see any profit after all these claims are satisfied, because the way the profit is divided among owners depends on the business’s legal structure. This chapter shows how legal structure determines your ...