Stock Market Game

What is a Company Company – A business or association usually formed to manufacture or supply products or service for profit. Can be: Partnership Limited Liability Partnership (LLP) Corporation Sole Proprietor

Partnership In a partnership – Partners share the profits or losses of the business in which they have invested Personally liable for company debt Your assets (things that you own) will cover the company debt

Limited liability Partnership Transfers much of the firm’s personal liability from the partners to the partnership

Public Corporation Is a company with publicly traded shares that anyone can buy in a stock market. Is also legally separated from the stockholders (people that own the stock) and the managers that run it Stock holders own the company

Corporation Advantages Stockholders are not responsible for the company’s debt A corporation continues to exist even if the stockholders or managers change Stockholders can easily sell their ownership shares through the stock market

Private Corporation May be owned by an individual Or privately sell stocks to fund the business Stocks are not sold publicly on the stock market

Sole Proprietor Company is owned and run by one individual who receives all of its profits and bear all of its losses. Owner is personally liable for all of the companies debt

Stocks Initial Public Offering – IPO Initial sale of stock to the public by investment bankers Underwriter – Investment banker that buys an entire new securities issue from a company and resells it

Stock Exchanges 3 Major stock markets NYSE – New York Stock Exchange NASDAQ – National Association of Securities Dealer Automated Quotation AMEX- American Stock Exchange

Types of Stock Common Stock Preferred Stock

Common Stock Shares of the company do not guarantee a dividend (Part of the companies profit that are shared with the stockholder) Dividend may be more then preferred stock holders Right to vote for Board of Directors Right to vote at Annual Meeting

Preferred Stock Guaranteed dividend No voting rights

Regulating Agency Securities and Exchange Commission (SEC)

Stock Terms Earnings – The amount of money that remains after subtracting the companies expenses from its revenue Investor – Someone who risks funds with the hope of it increasing in value

Corporations Registered by a state and operates apart from its owners Three Types C-Corporation S-Corporation Non-Profit Corporation

C-Corporation Pays taxes on earnings Shareholders pay taxes as well File Certificate of Incorporation with the state Issue stocks Shareholders – Owners of Corporation Required to have a Board of Directors

C-Corporation Advantages Status – Corporations get help getting loans Limited Liability – Only liable up to the amount of their individual investment Perpetual Existence – Continuous life Owners can create pension and retirement funds and offer profit sharing Tax Advantage – Deduct certain expenses from their reported income (Salaries and Contribution to benefit plans)

C-Corporation Disadvantages Expensive to start up – Cost $500 to $2500 to create Taxed – Corporations income is heavily taxed Corporation pay tax on profits Shareholders pay tax on dividends

Subchapter S Corporation Taxed like a partnership Avoids double taxation Advantage Profits taxed only once at shareholders personal tax rate S Corp is not a taxpaying entity

Subchapter S Corporation Disadvantage Can have no more than 75 stockholders who must be US citizens Only have one class of stock Cash businesses are S Corps If business produces enough cash, the form works If business shows a large taxable profit but has not generated enough cash to cover the taxes, the owners must pay out of their earnings

Nonprofit Corporation Businesses that benefit certain causes in the community Make money for reasons other than the owner’s profit Business can make profit, however, the profit must remain within the company and not be distributed to shareholders

Limited Liability Company Benefits Simpler to start up than a corporation Allows for flexibility of a partnership structure Protects it owners with the limited liability of a corporation Not subject to double taxation Not limited on the number of members or their status

Limited Liability Company Company whose owners and managers enjoy limited liability and some tax benefits, but it avoids some restrictions associated with S Corporation