Learning What A Corporation Is..and I have a blog which you know already

Dear Crystal Lou,
This is so much fun. I haven’t learned a thing about finance yet but I did “tweet” once. Russ says I have to do some work now, which is less fun but here I go.

Today’s topic is: What is the stock market? What are Stocks? What are bonds?

Russ is still working on my diary page. It will be called a blog and pretty soon I will just write on that blog and save myself the trouble of cutting and pasting this into your email. He said to keep writing to you though so I have something to put on the blog when he gets it up there.

You probably wonder what I have learned about stocks so I will tell you now. Researching stocks is turning into a rabbit hole I didn’t know existed! Here’s the beginning:

According to Wikipedia, which has all kinds of information on it but I don’t know how much is true,  a stock is:

A fractional ownership of a corporation in proportion to the number of shares.

Say what?

I didn’t really understand that, so I am breaking it down even more. I just imagined that this sentence is like a sweater I’m knitting and come to find I have more stitches on the needle than I need so I have to keep unraveling it until I figure out where I added stitches.

Unraveling this sentence..

Starting with:

A corporation:

A corporation is like a company, or a business. And it is made up of a group of people OR an organization (I would guess of people and not pigs) that are allowed to act as a single person under the law.

If you want to be a corporation you have to follow a bunch of rules and file certain kinds of papers with the government. I guess you could do this on your own but it seems like most corporations use lawyers to do this. I also guess you wouldn’t make a corporation unless you figured you’d be making a lot of money and could afford to pay the lawyers to form the corporation in the first place. That sounds a lot like me working at my job, them paying me, and then me giving them a piece of my money to let me work at my job, but whatever, maybe it’s more complicated than that, I don’t know.

At any rate: that is what a corporation does.

Now you ask? Why would you want a corporation if it costs money just to call yourself a corporation. Why wouldn’t you just start a business and hire people and pay them directly?


Good question Crystal Lou! Mostly because and I’m quoting “Corporations enjoy limited liability for their investors which can lead to losses being externalized from investors to the government or general public”

I will have to examine that sentence too cause at face value, it sounds like BS.