Business Forms Economics Unit 2 Ms. Whitlow

Largest Company

Corporations  Approximately 90% of all business in the U.S. is done by corporations  A form of business recognized by law as a separate legal entity having all the rights of an individual.  Corporations have the right to buy and sell property, enter into legal contracts, and sue or be sued.

Forming a Corporation  People must file for permission to create a corporation from the national or state government.  The charter states the name of the business, address, purpose, and other features.  The charter also specifies the number of shares of stock.  If a profit is made a dividend is given to each stockholder 

Corporation Structure  Each stockowner has certain ownership rights dependent on the type of stock owned.  Common stock: Basic ownership of a company, stockholder usually receives one vote per share.  The board of directors is elected by the stockholders and sets broad policies and goals and hires a professional management team to run the business on a daily basis.

Corporation Structure  Preferred stock: represents nonvoting ownership of a corporation.  Receive dividends and are first to have their shares paid off if the company goes bankrupt  If an individual controls 50%+1 of the stock then that individual can control the company.

Other Corporations  Public or private?  For Profit or Non Profit

Corporations Strengths  Easy to raise financial capital, sells stock to raise money  Can also issue bonds  Can hire the best management team possible to run the company  Provides limited liability for the owners  Unlimited life, the business continues to exist even when the ownership changes hands and ownership is easy to transfer

Corporation Weakness  It is difficult and expensive to get a charter  Owners have little say in how the business is operated  Corporations must pay income tax  Corporations are subject to heavy government regulations