{"id":45384,"date":"2023-08-05T13:21:28","date_gmt":"2023-08-05T13:21:28","guid":{"rendered":"https:\/\/analystprep.com\/cfa-level-1-exam\/?p=45384"},"modified":"2026-03-05T20:17:05","modified_gmt":"2026-03-05T20:17:05","slug":"features-of-corporate-issuers","status":"publish","type":"post","link":"https:\/\/analystprep.com\/cfa-level-1-exam\/corporate-issuers\/features-of-corporate-issuers\/","title":{"rendered":"Features of Corporate Issuers"},"content":{"rendered":"\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"QAPage\",\n  \"mainEntity\": {\n    \"@type\": \"Question\",\n    \"name\": \"Double taxation will matter the most for which of the following?\",\n    \"text\": \"Double taxation will matter the most for which of the following?\",\n    \"answerCount\": 3,\n    \"acceptedAnswer\": {\n      \"@type\": \"Answer\",\n      \"text\": \"The correct answer is B. Double taxation affects shareholders who live in countries with high tax rates on dividend income because profits are taxed first at the corporate level and again when distributed as dividends.\"\n    },\n    \"suggestedAnswer\": [\n      {\n        \"@type\": \"Answer\",\n        \"text\": \"A company that reinvests its after-tax profits each year into business expansion.\"\n      },\n      {\n        \"@type\": \"Answer\",\n        \"text\": \"Shareholders who live in a country with high tax rates on dividend income.\"\n      },\n      {\n        \"@type\": \"Answer\",\n        \"text\": \"A company in a tax jurisdiction that pays no tax at all.\"\n      }\n    ]\n  }\n}\n<\/script>\n\n\n\n<iframe loading=\"lazy\" width=\"560\" height=\"315\" src=\"https:\/\/www.youtube.com\/embed\/SRcCsC7jOgg?si=GbCftkCty6xliaD7\" title=\"YouTube video player\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe>\n\n\n\n<p>In this section, we shall delve more into corporations. Corporate issuers are corporations that raise their capital in financial markets. Understanding corporate issuers is essential for financial analysts because they can raise more capital from investors than governments worldwide.<\/p>\n\n\n\n<p>Key features include:<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Legal Identity<\/h2>\n\n\n\n<p>When a corporation is formed, articles of incorporation to a regulatory authority are filled. As such, a corporation is considered a legal entity that is unique and separate from its owners. Being a legal entity implies that a corporation has the rights and responsibilities of an individual. As such, it can participate in activities such as signing contracts, hiring employees, suing, being sued, borrowing, lending money, paying taxes, and initiating investments.<\/p>\n\n\n\n<p>Established corporations are subject to regulatory jurisdictions in which they conduct business, list their securities, and are incorporated.<\/p>\n\n\n\n<p>Depending on where the company is incorporated, where business is conducted, and where the company seeks financing, notable activities that regulatory bodies mainly concentrate on include:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Registration of corporations.<\/li>\n\n\n\n<li>Financial and non-financial reporting and disclosure.<\/li>\n\n\n\n<li>Corporation&#8217;s capital market activities.<\/li>\n<\/ul>\n\n\n\n<div style=\"margin: 0 0 20px 0;\">\n  <a\n    href=\"https:\/\/analystprep.com\/free-trial\/\"\n    target=\"_blank\"\n    rel=\"noopener noreferrer\"\n    style=\"\n      display: block;\n      width: 100%;\n      border: 2px solid #1e63ff;\n      color: #1e63ff;\n      background: #ffffff;\n      padding: 10px 14px;\n      border-radius: 10px;\n      font-weight: 500;\n      line-height: 1.35;\n      text-decoration: none;\n      box-sizing: border-box;\n      text-align: center;\n    \"\n  >\n    Learn corporate issuer features with a free trial.\n  <\/a>\n<\/div>\n\n\n<h2>Owner-Manager Separation<\/h2>\n<p>A notable corporation feature is owner-operator separation; the business owners and managers are independent. In other words, the business owners are excluded from the company&#8217;s day-to-day operations.<\/p>\n<p>The owners elect a board of directors to run the business. The board then hires the CEO and other senior managers to oversee the corporation&#8217;s day-to-day operations. The board must conduct business that aligns with the owners&#8217; interests; otherwise, the owners may enact change through voting rights linked to their shares.<\/p>\n<p>In addition to adhering to the owner&#8217;s interests, the board is expected to consider the interests of other stakeholders such as employees, creditors, customers, suppliers, regulators, and members of the society where the corporation operates.<\/p>\n<p>The Owner-Manager separation of a corporation allows corporations to access capital financing easily. Capital is the only requirement to become an owner, so the owners can leverage greater resources to run the business.<\/p>\n<h2>Owner\/Shareholder Liability<\/h2>\n<p>The risks in a corporation are shared among all owners. Owners have limited liability i.e., the maximum loss owners can incur is the amount of their investment in the business. Returns are also shared by the owners through equity claims proportional to their respective shares.<\/p>\n<h3>External Financing<\/h3>\n<p>It is easy for corporations to raise money compared to other business structures because buying a share is the only requirement to become an owner. Corporations access capital financing through capital providers who are willing to finance a company in return for the company&#8217;s issued securities (shares or debt securities). Corporations can be financed through either equity or debt, as discussed below.<\/p>\n<ul>\n<li><strong>Ownership capital (equity):<\/strong> This is the money invested by a corporation&#8217;s owners in return for the company&#8217;s ownership (they become shareholders). Hence, they are entitled to receive profit distributions in the form of dividends.<\/li>\n<li><strong>Borrowed capital (debt):<\/strong> Money borrowed from lenders (bondholders). The bondholders exchange their capital for issued debt securities with no ownership entitlement.<\/li>\n<\/ul>\n<p>Capital providers include corporations, family offices, governments, and individuals.<\/p>\n<h4>Taxation<\/h4>\n<p>Corporations are subject to the tax authority and tax codes outlining the issuer&#8217;s tax reporting, payment, and status. Tax regimes on corporations vary from country to country.<\/p>\n<p>In most countries, corporations are taxed directly on their profits. Moreover, shareholders may be taxed on dividends (double taxation of corporate profits). However, in some countries, shareholders are not taxed if the corporations had initially paid taxes on the dividends distributed.<\/p>\n<blockquote>\n<h3>Question<\/h3>\n<p>Double taxation will matter the <em>most<\/em> for:<\/p>\n<ol type=\"A\">\n<li>A company that reinvests its after-tax profits each year into business expansion.<\/li>\n<li>Shareholders who live in a country with high tax rates on dividend income.<\/li>\n<li>A company in a tax jurisdiction that pays no tax at all.<\/li>\n<\/ol>\n<p><strong>Solution<\/strong><\/p>\n<p><strong>B is correct<\/strong>. High tax rates on shareholder dividends will cause companies to retain profits, change the organizational form of business or find an alternative way of distributing profits.<\/p>\n<p><strong>A is incorrect<\/strong>. No double taxation occurs because the company reinvests its profits; thus, no dividends are paid to shareholders.<\/p>\n<p><strong>C is incorrect<\/strong>. Double taxation will not be an issue if the company is not entitled to pay tax.<\/p>\n<\/blockquote>\n\n\n<div style=\"margin: 40px 0; text-align: center;\">\n  <a\n    href=\"https:\/\/analystprep.com\/free-trial\/\"\n    target=\"_blank\"\n    rel=\"noopener noreferrer\"\n    style=\"\n      display: inline-block;\n      background: #1f5fcc;\n      color: #ffffff;\n      padding: 16px 34px;\n      border-radius: 12px;\n      font-weight: 700;\n      font-size: 20px;\n      text-decoration: none;\n      box-shadow: 0 4px 12px rgba(0,0,0,0.15);\n    \"\n  >\n    Start Free Trial \u2192\n  <\/a>\n\n  <div style=\"margin-top: 12px; font-size: 16px; color: #333333;\">\n    Practice CFA corporate issuers questions and strengthen core concepts.\n  <\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>In this section, we shall delve more into corporations. Corporate issuers are corporations that raise their capital in financial markets. Understanding corporate issuers is essential for financial analysts because they can raise more capital from investors than governments worldwide. Key&#8230;<\/p>\n","protected":false},"author":7,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[25],"tags":[],"class_list":["post-45384","post","type-post","status-publish","format-standard","hentry","category-corporate-issuers","blog-post","no-post-thumbnail","animate"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.9 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Features of Corporate Issuers | CFA Level I Notes<\/title>\n<meta name=\"description\" content=\"Learn the key features of corporate issuers, including how companies raise capital through equity and debt financing.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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