Unlike a sole proprietorship, a corporation is a business owned by stockholders. corporation

E. Napp  A corporation is a legal entity owned by individual stockholders.  A corporation is considered a separate entity apart from its owners.  As such, the corporation can be sued but individual stockholders cannot be sued.

1. Form of business recognized by law as a separate legal entity with all the rights of an individual 2. Have to file for permission with federal or state government to create 3. Partially owned by stockholders (investors who buys ownership certificates in the firm) Examples: Ford, GM, ABC, NBC

Known as articles of incorporation, is the legal instrument used to establish a corporation. Function: sets forth the activities the corporation intends to engage in once established Feature: 1. Name of the business 2. Names of board of directors 3. Address of the business 4. Name of the registered agent (The registered agent is the individual designated to accept summons and petition on behalf of a corporation if it is sued)

Not easy to get a charter  Incorporation is tricky, and filings must be done in a certain order and have certain phrases/clauses (lots of fees)  Each state has different requirements  Any special circumstances in the incorporation (like incorporating in several states, or incorporating a franchise, or incorporating with a fictitious name), can cause you problems without an attorneyincorporating a franchise fictitious name

1. easy to raise financial capital (can sell stocks to investors, can borrow money by issuing bonds that it will repay with interest), 2. limited liability for owners, 3. directors can hire professional managers to run the firm, 4. unlimited life, 5. easy to transfer ownership (stockholders can sell their stocks) 1. double taxation of profits (corporation pays taxes on its profits and stockholders pay taxes on money made), 2. difficult and expensive to get a corporation charter, 3. owners/stock shareholders have little to no voice in how business is run, (Even with majority stock) 4. subject to more government regulation.

Secretary Dept. Mgr Vice President Marketing Supervisor Vice President Production Dept. Mgr Vice President R & D Director Of Personnel Vice President Personnel CEO (President) Treasurer Board of Directors (Chairperson) Stockholders

Corporations 20% Partnerships 7% Sole Proprietorships 73% Partnerships 6% Sole Proprietorships 5% Corporations 89% Percentage of Firms Percentage of Sales Corporations 60% Percentage of Employed Sole Prop. & Part. 40%

 LLC – limited liability Not a corporation –income pass through entity to person(s) who own it – no double taxation LLC is like a corporation regarding limited liability, and it’s like a partnership regarding the flexibility of dividing profit among the owners. WHY LLC? lawsuit protection, credibility, tax savings, deductible employee benefits, asset protection, creating a separate legal entity for personal protection

a right granted to an individual or group to market a company's goods or services within a certain territory or location Key features:  A brand identification  A successful method of doing business  A proven marketing and distribution system In short, franchising is a strategic alliance between groups of people who have specific relationships and responsibilities with a common goal to dominate markets, i.e., to get and keep more customers than their competitors.

 Franchiser  Franchisee

 Tips  Turnover rates in the double digits should be a red flag.  See the franchise in action by visiting an operating unit.  Talk to former franchisees to find out why they left the business.

 Churches & Religious organizations  Charitable Organizations - United Way – American Red Cross

Cooperatives 1. consumer/purchasing - wholesale clubs 2. producer/marketing - agriculture 3. service - credit unions, insurance, HMO, child care (fastest growing) 4. industrial/employee stock ownership plan (ESOP) – more common in Europe In an ESOP, companies provide their employees with stock ownership, often at no up-front cost to the employees.

Vertical vs. Horizontal Vertical: a firm or company combines with a supplier or distributor (i.e. Time Warner Incorporated, a major cable operation, and the Turner Corporation, which produces CNN, TBS, and other programming) Horizontal: when two companies competing in the same market merge or join together (Daimler-Benz and Chrysler is a popular example of a horizontal merge)

Coke fields Iron ore deposits Steel mills Ships purchased by Carnegie Coke fields Iron ore deposits Steel mills Ships Railroads purchased by Carnegie Coke fields purchased by Carnegie Coke fields Iron ore deposits purchased by Carnegie Coke fields Iron ore deposits Steel mills purchased by Carnegie Vertical Merger WHY? To protect themselves against the loss of suppliers. -illuminate unnecessary costs -less dependent on other firms

GM General Motors Assembly Manufact- uring Refining Mining Transportation

GM General Motors FordChrysler Two firms that produce the same kind of product come together. Negative! Could lead to MONOPOLY!

Soft Drink Gasoline Clothing Parent Company Bakery Sporting Goods Fast Food Conglomerate at least 4 business making unrelated goods/services

Recap of Lecture by SquareOne