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What are Articles of Incorporation?
Articles of Incorporation must be filed with the Secretary of State’s office before a corporation can do business in a state. Articles of Incorporation are legal documents which contain descriptions of the most pertinent information about a company at its formation. This includes a list of board members, the number of shares to be issues, bylaws, business model, facilities and assets, and so forth. Continue reading...
What is the Structure of a Corporation?
Each state has different stipulations concerning what defines a corporation, but there are some commonalities across the country. Businesses must file Articles of Incorporation with the Secretary of State in the state of their home office, which detail the proposed structure of the business, before their status as a corporation can be approved. Each corporation is going to be different, of course, and each state has slightly different laws delineating the structure and bylaws that corporations must adopt. Continue reading...
What is a Corporate Bond?
A corporate bond is a debt security issued by a public or private company to raise capital. They are generally issued in multiples of $1,000 or $5,000, and the issuing company must agree to pay a certain interest rate typically determined by their creditworthiness and earning history/potential. Often times the corporation issuing the debt must use their physical assets as collateral, and it is often found that corporations are more likely to issue debt during an environment when interest rates are low, so they can borrow at attractive rates. Corporate debt that matures in less than one year is called ‘commercial paper.’ Continue reading...
What is an S-Corporation?
S-Corporations, also called S-corps, are a cross between a traditional corporation and an LLC. S-Corporations are companies which, as opposed to C-Corporations, do not pay any federal income tax on their earnings, except in a few exceptional cases. Instead, the earnings (or losses) are passed to the shareholders and will appear on their individual income tax reports. The “S” comes from the subchapter of the Internal Revenue Code where the taxation laws are outlined. S-corps can actually be owned and operated by a sole proprietor after incorporating or starting an LLC in the state of residence and filing IRS form 2253 (link to instructions and form — found here). Continue reading...
What is a Corporation?
A corporation is a business entity which has filed articles of incorporation. Unlike a Sole Proprietorship or a Partnership, a corporation is a legal entity that is separate from its owners. They are often referred to as C-corporations or C-corps, to distinguish them from S-corps, which are named after the subchapter which describes them in the law (though technically speaking, S-corps are corporations, too). Continue reading...
What is Chapter 7?
Chapter 7 is a type of bankruptcy filing that allows an individual to liquidate enough assets to repay their debts and to then be free and clear of debt obligations. This can help get a credit rating back on track sooner than another type of filing such as Chapter 13. Chapter 7 is for people with incomes below their state’s median income. By liquidating enough assets to pay off creditors, a debtor can use Chapter 7 to take care of all debts at once, or to have some of the debts forgiven if the debtor does not have adequate assets for liquidation. Continue reading...
What is Chapter 9?
Chapter 9 is a form of bankruptcy filing that is reserved for municipalities which have defaulted on their debt obligations. This could include a school district or other entities which have a municipal affiliation and the ability to generate revenue from local taxes. They cannot be made to liquidate anything. In fact, it forces the lender to accept a refinancing of the debt obligation. Because municipalities fall under state jurisdiction, the federal government, which governs bankruptcy court, does not have the ability to force liquidation of a municipal entity’s assets. Instead, this provision of bankruptcy law governs refinancing arrangements to facilitate the repayment of debts owed. Continue reading...
What is Chapter 10?
Chapter 10 is a bankruptcy filing available to smaller corporations where they agree to have their management replaced to oversee a restructuring, and they also agree to have their debts repaid within three years. If a company does not have more than $2.5 million in debt, they may be able to file Chapter 10 bankruptcy. The company and its attorney will put together a plan for reorganization and explain how the plan will ensure that the company meet its obligations in the future. Continue reading...
What is Chapter 11?
Chapter 11 is a type of bankruptcy filing a company can make to give itself time to reorganize and hopefully continue business. There are different types of bankruptcy filings a person or business can make, depending on how overwhelming their debt load is. Chapter 11 is a kind of bankruptcy filing that allows the corporate leadership to stay in control of a company while trading freezes on their stock and the company and its debts are reorganized. This is called “debtor in possession.” Continue reading...
What is Chapter 12?
Chapter 12 is a category of bankruptcy filing that can be made by a family farmer. It is otherwise similar in structure to Chapter 13 bankruptcy, where the debtor can prove an income and a trustee serves as intermediary between the debtor and the creditors. A family farmer will still be permitted to operate the farm once he has filed Chapter 12 bankruptcy. Like a Chapter 13 filing, the debtor will be allowed to propose a debt repayment schedule that he or she believes would be successful over the following 3-5 years. Some assets would be liquidated to pay off debts, but most of it would be paid according to the repayment schedule, under the care of a trustee who would serve as the proxy for the debtor in the remainder of the dealings with the creditors. Continue reading...
What is Chapter 13?
Chapter 13 bankruptcy is one of the most often used. It is similar to a Chapter 7, but it does not have income limits. It involves liquidating the assets of the debtor and making payment arrangements over a longer period of time than Chapter 7. Chapter 13 allows a debtor to propose a schedule for repaying debts that seems reasonable to the bankruptcy judge. It is for individuals who can prove steady income. Often Chapter 7 is filed by people who are impoverished, while Chapter 13 is the middle-to-upper class equivalent. Continue reading...
What is Chapter 15?
Chapter 15 bankruptcy is a newer type of bankruptcy filing that has only been around since 2005. It allows foreign companies access to the US bankruptcy court system in certain circumstances. This is part of the US’s compliance with international trade laws. Part of the aim of bankruptcy law is to preserve employment and protect investment. In an increasingly globalized economy it is understandable that the US could offer hearings to corporations which straddle national borders but are not based in the US. Continue reading...
What is a C-Corporation?
C-corps are generally the larger, more established companies in the country – most publicly-traded companies are C-corps. C-Corporations are companies which, as opposed to S-Corporations, are subject to federal income tax entirely separately from their owners. In addition, the earnings (or losses) are distributed among the shareholders (usually as dividends) and will appear on their individual income tax reports. This is the double-taxation for which C-corps are infamous. Continue reading...
What are Risk-Weighted Assets?
International banking regulations set forth in the Basel Accords require that institutions maintain a certain amount of capital relative to the amount of risk-weighted assets (RWA) they have. Conservative investments such a treasury notes have a risk weighting of zero, while corporate bonds have a weighting of .20, and so forth. The exact weighting system is laid out in Basel agreements. The system is designed to reveal a bank’s level of exposure to potential losses, and the capital requirements are there to balance out the risks and to protect the global economy from a meltdown in the financial system. Continue reading...
What is an Investment Center?
An investment center is an almost autonomous division of a company whose purpose is to generate returns on invested money. Cost center and profit center are terms used for various kinds of business divisions when observed from a solely financial, instead of operational, standpoint. These categories help a business to identify and group its similar assets for evaluation. A cost center can be turned into a profit center if it manages to reduce costs enough to generate a profit. Continue reading...
What Types of Bonds Are There?
Bonds are divided into a several categories, and it is possible to get substantial diversification within a bond portfolio alone. Bonds may be categorized into several types. There are investment grade bonds which are conservative and safe, high-yield bonds which are relatively risky and profitable, floating rate bonds whose coupon rate is not fixed, zero coupon bonds which only pay at maturity, and foreign bonds, and so on. Continue reading...
What is a Limited Liability Company (LLC)?
A limited liability company (LLC) establishes a separate entity from the sole proprietor or partners in a business which shields them from some of the liability associated with the business. An LLC is a business entity that creates a distinction between the business’s assets and liabilities and the assets and liabilities of the owner or partners. Sole proprietors and partnerships who do not file for this distinction leave themselves and all of their personal assets at risk, in the event of a lawsuit or bankruptcy. Continue reading...
What is Earnings Before Tax (EBT)?
Earnings before tax (EBT) is used to look at cash flows after expenses but before taxes. In a world without tax, this is what earnings would look like. Taking advantage of an advantageous tax-event, or hiring a better CPA, or merging with a company that can reduce the tax implications of some regular transactions, can bring earnings closer to their before-tax amount. Earnings before tax from an accounting standpoint is net income (which is another word for earnings) with taxes added together with it. Continue reading...
How to use the Detrended Price Oscillator in trading
The Detrended Price Oscillator (DPO) is a relatively uncomplicated tool of analysis that can be used to simplify a chart and identify conditions ripe for buying or selling. It turns the moving average line of a price chart into a flat horizontal axis, with prices plotted according to their distance from the moving average. Moving averages are important components of many technical indicators. A simple moving average determines the average of a range of closing prices for a security or index for a specific period of time. An exponential moving average is a moving average that gives more weight to the most recent data. Simple moving averages are not weighted for time the way that exponential moving averages are, which has the effect of snapping the chart to the most current information, while simple moving averages have lag. Continue reading...
What are Municipal Bond Funds?
Municipal bonds funds invest exclusively in tax-advantaged municipal bond issues. Municipal Bond Funds invest in issues of municipal debt, often with the intention of using its tax advantages. Bonds held in a ‘muni fund’ might be state or local issues of general obligation or revenue bonds. Gains on muni funds are not taxable at the federal level, and if a person resides in the state in which the bond was issued, they can most likely avoid state or local taxes on gains as well. Continue reading...