Section 3

 A Corporation is a legal entity owned by individual stockholders. › Stock is a certificate of ownership in a corporation.

 Closely held corporation is a corporation that issues stock to only a few people, often family.

 Publicly held corporation is a corporation that sells stock on the open market.

 Publicly held corporation have many stockholders, are sold in places like New York Stock Exchange.

Owners / Stockholders They elect a board of directors Board of directors Make all major decisions for corporation, including hiring officers who run corporation. Corporate officers then hire management and employees. These people work in various departments.

1. Limited liability for owners 2. Transferable ownership 3. Ability to attract capital 4. Long life

 Limited liability  Flexibility  Transferable

 More potential for growth  Raise money for capital › Selling stock or bonds  Do not need managerial skills

1. Expense and difficulty of start-up 2. Double taxation 3. Potential loss of control by the founders 4. More legal requirements and regulations

 Difficulty and expense of start-up  Must get certificate of incorporation which is a license to form a corporation issued by a state government.

 Double Taxation › Corporations are considered separate legal entities from their owners, so therefore they must pay taxes on their income and stockholders must also pay taxes on their income.

 Loss of Control  More Regulation › Annual reports to Securities and Exchange Commission (SEC), stock market regulators.

 Horizontal Mergers  Vertical Mergers  Conglomerates

 The combination of two or more firms competing in the same market with the same good or service.

 The combination of two or more firms involved in different stages of producing the same good or service.

 Business combination merging more than three businesses that make unrelated products.

 Large corporation that produces and sells its goods and services throughout the world. › Must obey laws and taxes where they are located

 Providing jobs worldwide, spread new technologies.  Influence culture and politics in countries, poor working conditions.

 A semi-independent business that pays fees to a parent company in return for exclusive right to sell a certain product or service in a given area.

1. Management training and support 2. Standardized quality 3. National advertising programs 4. Financial assistance 5. Centralized buying power

1. High franchising fees and royalties, a share of earnings given as payment. 2. Strict operating standards 3. Purchasing restrictions 4. Limited product line

 A cooperative is a business organization owned and operated by a group of individuals for their mutual benefit.

 Retail outlet owned and operated by customers. › Some require work, some require fees.

 Cooperatives that provide service instead of goods. › Discounted insurance, banking services, health care, legal help, or baby sitting.

 Agricultural marketing cooperatives that helps members sell their products

 Institution that functions much like a business, but does not operate for the purpose of generating profits › Museums, YMCA, Boys and Girls Clubs, public schools.

 Nonprofit organization that works to improve the image, working conditions, and skill levels of people in particular occupations.

 Nonprofit organization that promotes collective business interests for a city, state, or other geographical area, or for a group of similar businesses.

 Nonprofit organization that promotes the interests of a particular industry.

 An organized group of workers whose aim is to improve working conditions, wages, hours, and fringe benefits.