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

Partnership agreements Chapter 6 Corporate Forms of Business Ownership

Partnership agreement answers Chapter 6 Corporate Forms of Business Ownership

Chapter 6 Corporate Forms of Business Ownership Lesson 6.1 Corporations Goals Explain the basic structure of a corporation. Describe how a corporation is formed and organized. Chapter 6 Corporate Forms of Business Ownership

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

Size of Corporations sales vs. 17 X Greater 16 X Greater Chapter 6 Corporate Forms of Business Ownership

Basic Features of a Corporation New Jersey Approved Corporation Business Class, Inc. 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 Chapter 6 Corporate Forms of Business Ownership

Basic Features of a Corporation Board of directors — ruling body of the corporation – ELECTED by Stockholders to plan and lead. Officers — top executives hired by Board to manage the business, president, secretary, treasurer, CEO, CFO 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 Balance sheet, stock not money Handle voting rights 1 stock = 1 vote Chapter 6 Corporate Forms of Business Ownership

Chapter 6 Corporate Forms of Business Ownership Right of Stockholders Chapter 6 Corporate Forms of Business Ownership

Corporation advantages Chapter 6 Corporate Forms of Business Ownership

Corporate Disadvantages Chapter 6 Corporate Forms of Business Ownership

Chapter 6 Corporate Forms of Business Ownership Stock voting example Chapter 6 Corporate Forms of Business Ownership

Lesson 6.2 Close and Open Corporations Goals Distinguish between close and open corporations. Explain the major advantages of the corporate form of business. Explain the major disadvantages of the corporate form of business. 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

What types of Businesses are suited to being Corporations? Businesses that require a large amount of Capital i.e. hotels, Auto manufacturers etc. Businesses with uncertain futures i.e. new magazine, amusement parks because of the risk involved Chapter 6 Corporate Forms of Business Ownership

Board of Directors of Nike Mark G. Parker President and Chief Executive Officer of NIKE, Inc. John G. Connors Partner in a venture capital firm. Timothy D. Cook Chief Operating Officer of Apple Computer Jill K. Conway, Visiting scholar from MIT in science, technology and society. Ralph D. DeNuzion, age 72, President of an investment firm Alan B. Graf Executive Vice President and Chief Financial Officer of FedEx. Douglas G. Houser Partner in the Portland, Oregon law firm Jeanne P. Jackson Founder and chief executive officer of MSP Capital, a private investment company. Ms. Jackson was chief executive officer of Walmart.com from March 2000 to January 2002. She was with Gap, Inc., as president and chief executive officer of Banana Republic. She has held various retail management positions with Victoria’s Secret, The Walt Disney Company, Saks Fifth Avenue and Federated Department Stores. Ms. Jackson is a trustee of the United States Ski and Snowboard Team and serves on the board of advisors of the Harvard Graduate School of Business. She is also a director of McDonald’s, Nordstrom and Williams-Sonoma. Chapter 6 Corporate Forms of Business Ownership

Chapter 6 Corporate Forms of Business Ownership Questions A corporation that does not offer its stock to the public for sale is a(n) Close Corporation Open Corporation Private Corporation None of the above. Chapter 6 Corporate Forms of Business Ownership

Chapter 6 Corporate Forms of Business Ownership Questions The advantages of a corporate form of ownership include all of the following except Double taxation Available sources of capital Limited liability Permanency of existence Chapter 6 Corporate Forms of Business Ownership

Lesson 6.3 Specialized Types of Organizations Goals Describe organizations that are specialized alliances between companies or individuals. Describe specialized forms of corporations formed for tax or nonprofit reasons. 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. Example: NUMMI AutoAlliance Ford and Mazda Sony-Ericsson, Baseball Network (ABC, NBC and Major League Baseball) Verizon Wireless (Verizon and Vodafone) XFL – NBC and World Wresting Entertainment Chapter 6 Corporate Forms of Business Ownership

Organizational Alliances Virtual corporation — network of companies that form alliances among themselves as needed to take advantage of fast-changing market conditions Chapter 6 Corporate Forms of Business Ownership

Chapter 6 Corporate Forms of Business Ownership Virtual Corporation A. Wants to sell a specialized computer. B. Has some parts needed C. Has some additional parts needed. D. Knows people who could use the computer. Chapter 6 Corporate Forms of Business Ownership

Chapter 6 Corporate Forms of Business Ownership Cooperatives 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

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 _ Less than 100 stockholders Domestic company and no Non-resident aliens as stockholders Only one class of stock, NO DOUBLE TAXATION Chapter 6 Corporate Forms of Business Ownership

Other Limited Liability Corporations Nonprofit corporation — organization that does not pay taxes and does not exist to make a profit ELKS, Masons, Local Hospitals, Girl Scouts. Quasi-public corporation — business that is important to society, lacks profit potential, and is often run by local, state, or federal government Turnpike, water and sewer Chapter 6 Corporate Forms of Business Ownership