Share holders are internal or external liability?

Question

Answer

Bro, according to sperate entity concept shareholders fund is Internal liability of a business

Answer

Shareholders are internal liability because they give capital to business and they are owners

Answer

Share holders are owner of company and they also invest money in company

Answer

Shareholders: Internal or External Liability?

Introduction:
Shareholders are individuals or entities that own shares in a company, representing their ownership interest in the organization. They can be classified as either internal or external liabilities depending on their relationship and obligations towards the company.

Internal Liability:
Internal liabilities refer to shareholders who have a direct role in the management and operations of the company. These shareholders are typically the founders, executives, or employees who hold shares in the company. They have a vested interest in the company's success and are actively involved in decision-making processes. Internal liability shareholders have certain responsibilities and accountability towards the company, including:

1. Duty of Loyalty: Internal liability shareholders owe a duty of loyalty to the company and its stakeholders. They are expected to act in the best interest of the company and avoid any conflicts of interest.

2. Board of Directors: Internal liability shareholders may serve on the board of directors, providing strategic guidance and oversight to the management team. They have fiduciary duties towards the company and its shareholders.

3. Management Responsibilities: Shareholders who hold executive positions in the company have additional management responsibilities. They are accountable for the day-to-day operations, financial performance, and overall success of the organization.

External Liability:
External liabilities refer to shareholders who are not actively involved in the management or operations of the company. These shareholders are typically individual or institutional investors who hold shares for investment purposes. They have a financial stake in the company but do not have direct control or decision-making authority. External liability shareholders have certain rights and entitlements, including:

1. Voting Rights: External liability shareholders have the right to vote on significant matters, such as the election of the board of directors, major corporate transactions, and changes in the company's articles of incorporation.

2. Dividend Entitlement: Shareholders are entitled to receive dividends, which are a portion of the company's profits distributed to shareholders. External liability shareholders can expect to receive dividends based on their shareholding.

3. Information Rights: Shareholders have the right to access certain company information, including financial statements, annual reports, and other disclosures. This allows them to stay informed about the company's performance and make informed investment decisions.

Conclusion:
Shareholders can be both internal and external liabilities, depending on their involvement and responsibilities towards the company. Internal liability shareholders actively contribute to the management and operations of the company, whereas external liability shareholders primarily hold shares for investment purposes. Understanding the distinction between these two types of shareholders is essential for effective corporate governance and stakeholder management.

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