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

2. 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

3. Basic Features of a Corporation
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
Board of directors — ruling body of the corporation
Officers — executives hired to manage the business
Chapter 6 Corporate Forms of Business Ownership

4. 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
Handle voting rights
Chapter 6 Corporate Forms of Business Ownership

5. 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

6. 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

7. Organizational Alliances
Joint venture — agreement among two or more businesses to work together to provide a good or service
Virtual corporation — network of companies that form alliances among themselves as needed to take advantage of fast-changing market conditions
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

8. Chapter 6 Corporate Forms of Business Ownership
Virtual Corporation
Chapter 6 Corporate Forms of Business Ownership

9. 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
Nonprofit corporation — organization that does not pay taxes and does not exist to make a profit
Quasi-public corporation — business that is important to society, lacks profit potential, and is often run by local, state, or federal government
Chapter 6 Corporate Forms of Business Ownership