1. Corporations, Mergers, and Multinationals

2. Corporations
a legal entity, or being, owned by individual stockholders, each of whom faces limited liability for the firm’s debt
Legal identity separate from those of its owners
Pay taxes, may engage in business, make contracts and take legal actions

3. Stock
shares which represent their portion of ownership in the corporation

4. Types of Corporations
Closely Held Corporations: corporations that issues stock to only a few people, often family members

5. Types of Corporations continued…
Publicly Held Corporations: Corporation that sells stock on the open market

6. Corporate structure Basic structure Board of Directors
Appointed officers
Officers hire managers

7. Advantages of Incorporation
Advantages for Stockholders
Investors do not carry responsibilities for the corporation’s actions
Only lose the investment
Shares are transferable

8. Advantages for the Corporation
Potential for growth
Selling shares can raise money to purchase capital
Can borrow money through the use of bonds
a certificate issued by the corporation, which promises to repay with interest the amount it borrowed from a buyer
Corporations can do business indefinitely

9. Disadvantages of Incorporation
Difficulty and Expense of Start-up +
File for a certificate of incorporation, or corporate charter
corporate name
statement of purpose
Must be reviewed by state officials

10. Disadvantages of Incorporation
Loss of Control
Managers, and board of directors, manage the corporation
Regulation
Most regulated type of business

11. Double Taxation Corporations must pay taxes on their income
Stockholders have to pay tax on dividends
portion of corporate paid out to stockholders
Capital gains tax collected when investors sell out

12. Corporate Combinations
Horizontal Mergers
Two or more firms competing in the same market with the same good or service merge
DaimlerChrysler

13. Corporate Combinations continued …
Vertical Mergers
Two or more firms involved in different stages of producing the same good or service merge
“Ford buying Bridgestone tires”

14. Corporate Combinations Continued …
Conglomerates
Business combination merging more than three businesses that make unrelated products
G.E.

16. Multinational Corporations
A large corporation that produces and sells its goods and services throughout the world
must obey laws and pay taxes in each country

17. Advantages Provide product and jobs around the world
Spread new technologies
Help poorer nations gain better living conditions

18. Disadvantages Unduly influence the culture and politics
Low wage jobs and poor working conditions