Corporations Mergers and Multinationals In this lesson students

Corporations, Mergers, and Multinationals In this lesson, students will be able to identify characteristics of corporations, mergers, and multinationals. Students will be able to identify and/or define the following terms: Corporation Stocks Dividends Mergers E. Napp

Unlike a sole proprietorship, a corporation is a business owned by stockholders. E. Napp

Corporation • A corporation is a legal entity owned by individual stockholders. • A corporation is considered a separate entity apart from its owners. • As such, the corporation can be sued but individual stockholders cannot be sued. E. Napp

Each stockholder is a partial owner of the corporation. E. Napp

Stocks • When a business is incorporated, stocks are generally sold. • By selling stocks, the corporation acquires capital. • By buying stocks, individuals become partial owners of the corporation. E. Napp

By becoming a stockholder or partial owner of Burger King, the investor receives some of the corporation’s profits. E. Napp

Limited Liability • However, it is important to remember that a corporation is a separate entity apart from its owners. • Therefore, the stockholder has limited liability. • He can only lose his investment. E. Napp

But don’t forget trade-offs. While investors make dividends or their share of the profits, corporations experience double taxation. E. Napp

Double Taxation • Double taxation is one of the disadvantages of incorporation. • Double taxation means that after corporations pay taxes on their profits, individual stockholders pay taxes on their dividends. • Profits are taxed twice! E. Napp

A multinational corporation (MNC) is a corporation that operates in different countries. E. Napp

Raising Money • Corporations raise money by selling stocks or bonds. • Remember the investment poem: Stocks, you own Bonds, you loan • When a person buys stock, he becomes a partial owner. When he buys bonds, he loans money to the corporation and must be repaid. E. Napp

The sale of stocks and bonds allow corporations to raise money. E. Napp

A merger occurs when one business acquires another business. The government carefully monitors mergers. E. Napp

Questions for Reflection: • How does a person become a stockholder and why would a person want to become a stockholder? • What are the advantages and disadvantages of incorporation? • How does a corporation become a multinational corporation? • Why does the government monitor mergers? E. Napp