Chapter 6 1 Corporate Forms of Business Ownership

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

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 2 Chapter 6 Corporate Forms of Business Ownership

Basic Features of a Corporation l l Charter (certificate of incorporation) — official document through which a state grants the power to operate as a corporation Stockholders — owners of the corporation – – l l 3 Shares — equal parts of ownership Dividends — profits distributed to stockholders on a pershare basis Board of directors — ruling body of the corporation Officers — executives hired to manage the business Chapter 6 Corporate Forms of Business Ownership

Formation of a Corporation l Prepare the certificate of incorporation – – l Operate the new corporation – – 4 Name the business State the purpose of the business Invest in the business Pay incorporation costs Get organized Handle voting rights Chapter 6 Corporate Forms of Business Ownership

Close and Open Corporations Close corporation l Also called closely held corporation l Does not offer shares of stock for public sale l Owned by just a few stockholders Open corporation l Also called publicly owned corporation l Offers shares of stock for public sale l Has large number of stockholders 5 Chapter 6 Corporate Forms of Business Ownership

Advantages and Disadvantages of Corporations Advantages l Available sources of capital l Limited liability of stockholders l Permanency of existence l Ease in transferring ownership 6 Disadvantages l Taxation l Government regulations and reports l Stockholders’ records l Charter restrictions Chapter 6 Corporate Forms of Business Ownership

Organizational Alliances l l l 7 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

Virtual Corporation 8 Chapter 6 Corporate Forms of Business Ownership

Other Limited Liability Corporations l l l 9 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