Business Organizations

Section 3 – Corporations, Mergers, and Multinationals

Corporation- a legal entity owned by individual stockholders.

Stocks (shares) - represent a portion of ownership of a corporation.

Types of Corporations Closely Held Corporation

2) Publicly Held Corporation

Advantages of Incorporation Advantages for the Stockholders No responsibility for corporations actions Stocks are transferable

Advantages for the Corporation Has great potential for growth. Bonds Can hire the best available capital. Corporations have long lives.

Disadvantages of Incorporation Difficult and expensive to start up – must have certificate of incorporation Loss of control Double taxation Must pay dividends Heavily regulated

Corporate Combinations Horizontal mergers Vertical mergers Conglomerate

Multinationals (MNCs) Large corporations headquartered in one country that have subsidiaries throughout the world.

Multinational corporate structure: Horizontally integrated multinational corporations

Vertically integrated multinational corporations

Diversified multinational corporations

Advantages of MNCs Offer products worldwide. spread new technologies and production methods across the globe.

Disadvantages of MNCs Influence culture and politics Critics are concerned about wages and working conditions