Chapter 6 Corporate Forms of Business Ownership ©2008 Thomson/South-Western

Chapter 6 Corporate Forms of Business Ownership Corporations Corporation — business owned by a group of people and authorized by the state in which it is located to act as though it were a single person, separate from its owners Chapter 6 Corporate Forms of Business Ownership

Basic Features of a Corporation Charter (certificate of incorporation) — official document through which a state grants the power to operate as a corporation Stockholders — owners of the corporation Shares — equal parts of ownership Dividends — profits distributed to stockholders on a per-share basis Board of directors — ruling body of the corporation Officers — executives hired to manage the business Chapter 6 Corporate Forms of Business Ownership

Formation of a Corporation Prepare the certificate of incorporation Name the business State the purpose of the business Invest in the business Pay incorporation costs Operate the new corporation Get organized Handle voting rights Chapter 6 Corporate Forms of Business Ownership

Close and Open Corporations Close corporation Also called closely held corporation Does not offer shares of stock for public sale Owned by just a few stockholders Open corporation Also called publicly owned corporation Offers shares of stock for public sale Has large number of stockholders Chapter 6 Corporate Forms of Business Ownership

Advantages and Disadvantages of Corporations Available sources of capital Limited liability of stockholders Permanency of existence Ease in transferring ownership Disadvantages Taxation Government regulations and reports Stockholders’ records Charter restrictions Chapter 6 Corporate Forms of Business Ownership

Organizational Alliances Joint venture — agreement among two or more businesses to work together to provide a good or service Virtual corporation — network of companies that form alliances among themselves as needed to take advantage of fast-changing market conditions Cooperative — business owned and operated by user-members for the purpose of supplying themselves with goods and services Chapter 6 Corporate Forms of Business Ownership

Chapter 6 Corporate Forms of Business Ownership Virtual Corporation Chapter 6 Corporate Forms of Business Ownership

Other Limited Liability Corporations Limited liability company (LLC) or Subchapter S corporation — special type of corporation allowed that is taxed as if it were a sole proprietorship or partnership Nonprofit corporation — organization that does not pay taxes and does not exist to make a profit Quasi-public corporation — business that is important to society, lacks profit potential, and is often run by local, state, or federal government Chapter 6 Corporate Forms of Business Ownership