Corporations Mergers and Multinationals Corporations n a legal

Corporations, Mergers, and Multinationals

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

Stock n shares which represent their portion of ownership in the corporation

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

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

Corporate structure n Basic structure n n n Board of Directors Appointed officers Officers hire managers

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

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

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

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

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

Corporate Combinations n Horizontal Mergers n Two or more firms competing in the same market with the same good or service merge n Daimler. Chrysler

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

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

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

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

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