Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1 Daily Information Dec. 4 Objectives: 1.Explain the basic structure of a corporation. 2.Summarize how a corporation is formed. Warm Up: What do you already know about corporations? Volkswagen letter due today!! Agenda: 1.Warm Up 2.Corporations 101 P.P. 3.Review Q’s 4.Socrative bottom line

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 2 What Is A Corporation?  A separate legal entity (artificial person)  Owned by a group of people  Created by the laws of the state A corporation can:  Make contracts  Borrow money  Own property (can buy or sell property)  Sue or be sued in its own name **less than 20% of all businesses but pulls in 82% of sales revenue

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Stock  Stock The shares of ownership of a corporation  Stockholder A person who owns a corporation's stock 4 3 © AP PHOTO/KEVIN P.CASEY

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Dividend Dividend A distribution of earnings to the stockholders of a corporation Proxy A legal form authorizing a person to vote on behalf of a stockholder 4 © ELNUR/SHUTTERSTOCK © NEVESHKIN NIKOLAY/SHUTTERSTOCK

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Closed and Open Corporations  Closed Corporation Stock is owned by relatively few people and not sold to public (Ex: Mars, Inc.)  Open Corporation Stock is bought and sold on security exchanges and can be bought by anyone (for public sale) (Ex: General Electric, Apple, Sony) 4 5 © MANGOSTOCK/SHUTTERSTOCK © AP PHOTO/RICHARD DREW

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Forming a Corporation “Incorporating” Must obtain permission from a state to form a corporation (a CHARTER) Can be any state that it chooses!!! Describe its purpose clearly (major changes must be submitted as a new request) Decide how to invest (how much and what type of stock to issue) Identify the firm’s name and address 6

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Corporate Charter  Submit articles of incorporation to the secretary of state once a home state has been chosen.  The state will then recognize the business as a corporation. 4 7

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Where to Incorporate  A business can incorporate in any state it chooses.  The decision is usually based on cost and the advantages and disadvantages of each state’s corporate laws and tax structure  Most small-medium sized businesses incorporate in the state where they do the most business. 4 8 © ILDOGESTO/SHUTTERSTOCK

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Types of Corporations  An incorporated business is called a domestic corporation in the state in which it is incorporated.  All other states where it does business is called a foreign corporation. 4 9 © FIKMIK/SHUTTERSTOCK

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Board of Directors  Elected by the stockholders  Top ruling body of a corporation  Responsible for setting corporate goals, developing strategic plans to meet those goals, and the firm’s overall operation  Consists of top managers from within the corporation as well as experienced managers or entrepreneurs from outside the corporation 4 10

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Corporate Officers  Executives hired to manage the business  Responsible for implementing strategies and directing the work of the corporation  Reports results to the board and stockholders 4 11

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 12 Board of Directors (Appoint officers and make major policy decisions) Vice President Treasurer President CEO Stockholders, Directors, Officers Stockholders exercise a great deal of influence through their right to elect the board of directors.

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 13

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Advantages and Disadvantages Disadvantages  Difficulty and expense of formation  Government regulation and reports  Conflict within the corporation  Double taxation  Lack of secrecy 4 14 Advantages  Limited liability of stockholders  Ease of raising capital  Ease in transferring ownership  Perpetual life  Specialized management

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Review Questions Work with a Partner  Checkpoints: Page 139, 143, 146  Assessment: 6.2 on page 149  Review Terms and Concepts Page 155, 156, ,8-10,13,15 15

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Review  Go to the following website: -  Enter the class number: c2e084ee  Enter your FULL NAME  Begin 1 16