Wealth Maximization Concepts Worksheet Maximizing Shareholder Wealth - MBA/540r4Bernard Lester is the CEO and founder of Lester Electronics, the publicly held Lester Electronics Company, Inc. earning $500 million a year. In 1984, Bernard took his company public, which is now traded on the NASDAQ market and has a Baa rating from a nationally recognized rating agency. A corporation is owned by shareholders who share the privilege of limited liability and whose exposure to liabilities is usually no greater than their initial investment. A corporation has a continuous life and does not depend on any shareholder to maintain its legal existence. A key feature of the corporation is the easy divisibility of ownership interest through the issuance of shares (Block & Hirt, 2005) Discuss definitions of wealth maximization (Ross Ch. 1) The corporate corporation The corporation “Of the many forms of commercial enterprises, the company is by far the most important. It is a separate legal entity. As such, a corporation can have a name and enjoy many of the legal powers of natural persons. For example, companies can acquire and exchange properties. Corporations can enter into contracts and can sue and be sued. For jurisdictional purposes the company is a citizen of the State in which it is headquartered. (He cannot vote, however.). Starting a company is more complicated than starting an estate or partnership. ” (Ross, et al, 2004 p. 13). Definitions of Wealth Maximization John Lin, founder and CEO of Shang-wa Electronics at the age of 68, John is looking forward to spending less time on work and more time with his grandchildren while they are still young. John has never found a successor and without one the business cannot afford to slow down. With one son a doctor and the other a commercial architect, John has begun to explore other options that might allow him to retire. The sole proprietorship represents the ownership of a single person and offers the advantages of simple decision-making and low organizational and operational costs (Block & Hirt, 2005). owned by one person and is the cheapest business to form. No formal charter is required and for most industries few government regulations need to be met. A sole proprietorship pays no corporate income tax. All profits of the business are taxed as individual income. The sole proprietorship has unlimited liability for business debts and obligations. No distinction is made between personal and corporate assets. The life of the sole proprietorship is limited by the life of the sole owner. Since the only money invested in the business is that of the owner, the equity capital that can be raised by the sole owner is limited to the owner's personal wealth” (Ross, et al, 2004 p.