Park University Corporations Securities Discussion

Please respond to each student 100-200 words

Student 1 Allison

Hi Class,

Many corporations own securities that allow them to earn additional income outside of income earned from the operations of their business. Income that is earned from the possession of securities, stocks, and bonds is paid out through interest and dividends. Interest income is taxable at the regular corporate tax rates, but dividends are taxed differently. Only 70% of a corporation’s dividend income is exempt from taxation, while the remaining 30% of income earned from dividends is subject to taxation at the regular corporate tax rate. The reasoning behind only taxing 30% of dividend income is because that 30% is subject to triple taxation. As the textbook highlights, taxation for S-corporations work differently due to their sub-chapter tax filings. Firms evaluate these differences and understand that debt financing forces them to pay interest, but equity financing forces them to pay dividends.

An example of a firm that utilizes corporate forms and corporate financing well is AT&T Inc. In May of 2021, AT&T Inc., decided to acquire WarnerMedia (Links to an external site.), and merge it with their already owned Discovery, to create a new s-corporation that would drive new business in the streaming media industry. This deal was made at $43 billion (using cash and debt financing) with AT&T Inc., but the merger was valued at $150 billion. If this merger was overvalued and caused partners to lose profits within this s-corporation, then the shareholder would be protected by the corporate veil where the partners can avoid double taxation and dividend taxation (Jennings, 2018, p. 608) This is a prime example of how major corporations can utilize capital and corporate tax classes to conduct better business and partnerships for profit.

Reference(s):

Jennings, M. (2018). Business: Its legal, ethical, and global environment. Cengage Learning.

Kovach, S., & Meredith, S. (2021, May 17). AT&T announces $43 billion deal to merge WarnerMedia with Discovery. CNBC. Retrieved April 19, 2022, from https://www.cnbc.com/2021/05/17/att-to-combine-warnermedia-and-discovery-assets-to-create-a-new-standalone-company.html

Student 2 Faith

Unit 6

The article I chose pertains to the sellers strike over Etsy’s higher fees. According to the Wall Street Journal article (Scott, 2022), over 15,000 sellers on Etsy have signed a petition and are against the company’s decision to raise their transaction fees. Many believe the $12 billion merchandise sales the company received last year, as opposed to the $5 billion in 2019, has a lot to do with it. The sellers believe the company is trying to be like Amazon and this hike in fees is a way to keep the company profit margins up. Etsy on the other hand contends that the fees will be reinvested to improve the sites’ ability to withstand higher traffic and to attract new customers.

I think this article identifies the unique relationship between a principal and agent, where the principal is a business and the agent in this case is not an employee but rather a smaller business or an independent contractor. As our Jennings text point out (2018, p.556), principals have less responsibility for independent contractors because they have little control over the contractor’s conduct. As a result, to limit their liability to independent contractors, Etsy like other online marketplaces has specific rules and procedures in place to sell on their site. One of which covers three types of fees that are required, which include listing fees, transaction fees, and payment processing fees (Etsy, n.d.). In light of their current issues, both have the option to terminate the relationship. I wonder what recourse both parties will take when the strike is over.

References

Etsy (n.d.). Frequently asked Questions, how do fees work on Etsy? Retrieved on 4/20/2022 from https://www.etsy.com/sell?ref=ftr

Jennings, M. M. (2018). Business It’s Legal, Ethical, And Global Environment (11th Ed.). Cengage Learning.

Scott, C. (2022, April 12). “Etsy Sellers Strike Over Fee Hike”. Wall Street Journal. B1

audio snippet can be found at; https://www.wsj.com/articles/etsy-sellers-strike-as-site-ramps-up-to-battle-amazon-11649681740?msclkid=102f74cdc0ba11ecacb9ca5c9bc6f976