1. Unit 2 - Understand the Nature of Business
Objective 2.01 – Understand the Types of Business Ownership
Topic – Corporations

2. Corporation
Organization owned by many people but treated by the law as if it were one person
An entity with the legal authority to act as a single person
Corporations Can….
Borrow or loan money
Buy and sell goods
Make contracts
Sue or be sued
Perform other business activities
Example: Wal-Mart, Coca~Cola

3. To start a corporation
File an Article of Incorporation with the state government
Must provide files of
Business name
Purpose
Location
Amount of stock to be issued
Names of directors
Conditions under which the business will operate

4. Individuals within Corporations
Shareholders/Stockholders
Owns shares of the company
One share of common stock equals one vote
Board of Directors
Control the Corporation
Officers
Run the day-to-day business operations

5. Corporation Advantages
Limited liability for shareholders
Cannot lose more than investment
Unlimited life
Easy to transfer ownership
Skilled personnel
Capital easy to obtain
Purchase of stocks

6. Corporation Disadvantages
Difficult to form and operate
Separate owners and managers
Operations controlled by shareholders and board of directors instead of original owner(s)
Example: 10 years after founding Apple, Steve Jobs was fired by the board of directors.
Government regulations
Double Taxation
Profits and earnings

7. Types of Corporations Limited Liability Company (LLC) S-Corporation
Provides limited liability protection to owners
Simpler set of organizing and operating requirements than a corporation
S-Corporation
Passes all income through to owners
Owners are only taxed once
Nonprofit Corporation
Groups who complete activities for the benefit of the public
Free from corporate taxes

8. Types of Corporations Domestic Foreign Alien
Chartered in a specific state
Lowe’s Home Improvement Store
Foreign
Chartered in one state, but doing business in another state
Coca-Cola
Alien
Chartered in another nation, but doing business in a state
Credit Suisse

9. Types of Corporations Public Private
Established for a governmental purpose
National Science Foundation
Export-Import Bank of the United States
Private
Established by individuals for business or charitable purposes.
Enterprise Rent-A-Car
American Cancer Society