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Corporations
A Corporation is a legal entity owned by individual stockholders. › Stock is a certificate of ownership in a
corporation.
Types of Corporations
Closely held corporation is a corporation that issues stock to only a few people, often family.
Types of Corporations
Publicly held corporation is a corporation that sells stock on the open market.
Types of Corporations
Publicly held corporation have many stockholders, are sold in places like New York Stock Exchange.
Corporate Structure
•Owners / Stockholders•They elect a board of directors
•Board of directors •Make all major decisions for corporation, including hiring officers who run corporation.
•Corporate officers then hire management and employees. •These people work in various departments.
Advantages of Incorporation
1. Limited liability for owners2. Transferable ownership3. Ability to attract capital4. Long life
Advantages for the Corporation
More potential for growth Raise money for capital
› Selling stock or bonds Do not need managerial skills
Disadvantages of Incorporations
1. Expense and difficulty of start-up2. Double taxation3. Potential loss of control by the
founders4. More legal requirements and
regulations
Disadvantages of Incorporations
Difficulty and expense of start-up
Must get certificate of incorporation which is a license to form a corporation issued by a state government.
Disadvantages of Incorporations
Double Taxation› Corporations are considered separate legal
entities from their owners, so therefore they must pay taxes on their income and stockholders must also pay taxes on their income.
Disadvantages of Incorporations
Loss of Control More Regulation
› Annual reports to Securities and Exchange Commission (SEC), stock market regulators.
Horizontal Mergers
The combination of two or more firms competing in the same market with the same good or service.
Vertical Mergers The combination of two or more firms
involved in different stages of producing the same good or service.
Multinational Corporations
Large corporation that produces and sells its goods and services throughout the world. › Must obey laws and taxes where they are
located
Advantages and Disadvantages
Providing jobs worldwide, spread new technologies.
Influence culture and politics in countries, poor working conditions.
Business Franchises
A semi-independent business that pays fees to a parent company in return for exclusive right to sell a certain product or service in a given area.
Advantages of Franchises
1. Management training and support2. Standardized quality3. National advertising programs4. Financial assistance5. Centralized buying power
Disadvantages of franchises
1. High franchising fees and royalties, a share of earnings given as payment.
2. Strict operating standards3. Purchasing restrictions4. Limited product line
Cooperative organizations
A cooperative is a business organization owned and operated by a group of individuals for their mutual benefit.
Consumer Cooperative
Retail outlet owned and operated by customers. › Some require work, some require fees.
Service Cooperatives
Cooperatives that provide service instead of goods. › Discounted insurance, banking services,
health care, legal help, or baby sitting.
Nonprofit Organizations
Institution that functions much like a business, but does not operate for the purpose of generating profits› Museums, YMCA, Boys and Girls Clubs,
public schools.
Professional Organizations
Nonprofit organization that works to improve the image, working conditions, and skill levels of people in particular occupations.
Business Associations Nonprofit organization that promotes
collective business interests for a city, state, or other geographical area, or for a group of similar businesses.