Business Blast Lesson 12 Slide 12A

What Does That Mean? TermDefinition corporationa legal entity which is separate and distinct from its owners in which ownership is shared, and which conducts business in its own name. sharea unit of ownership in a corporation; also referred to as stock. shareholdera person who owns shares in a company; also referred to as a stockholder. limited liabilityowners of the company (shareholders) cannot be held personally liable for the company's debts. Board of Directorsa group of individuals elected by the shareholders to act as representatives of the shareholders, and manage and make major decisions for the corporation. Slide 12B

What Does That Mean? TermDefinition equityownership; stock or security representing ownership. Chair of the Board of Directors the leader of the corporation, responsible for running the board of directors smoothly and effectively. Chief Executive Office CEO; responsible for the corporation's entire operations. He or she reports to the board of directors. Chief Operating Officer COO; responsible for the corporation's marketing, sales, production and personnel. He or she reports to the CEO. Slide 12C

What Does That Mean? Slide 12D TermDefinition Chief Financial Officer CFO; responsible for analyzing and reviewing financial data, reporting financial performance, and preparing budgets; He or she reports to the CEO. Chief Information Officer CIO; responsible for the company’s computer systems and cybersecurity. He or she reports to the CEO. parliamentary procedure set of rules and procedures for governing the deliberative proceedings of boards, clubs, and organizations; also known as Roberts Rules of Order. return on investment ROI; a commonly used profitability ratio for evaluating an investment; calculated by dividing the benefit (return of the investment) by the cost of the investment.

What Does That Mean? Slide 12E TermDefinition liabilitiesthe financial debts and obligations of a company. partnership a single business where two or more people share ownership and personal liability for the biusiness. limited liability company LLC; corporate structure that limits the personal liability of its members for the company’s debt and liabilites. sole proprietorshipa simple business entity owned and run by one individual. partnership a single business where two or more people share ownership and personal liability for the business.

Lesson 12 Objectives  Explain the key advantages of a corporation.  Compare the roles and duties of officers and directors of a corporation.  Name four common types of business entities.  Translate basic parliamentary procedure terms.  Explore whether he or she has the leadership traits of a CEO. Slide 12F

Question Q: How can innovators and entrepreneurs move forward on a project with clearly defined roles and responsibilities, but avoid personal liability for the project? A: Form a corporation Slide 12G

Slide 12H Why a Corporation?  Clarifies roles and responsibilities of team members  Limits personal liability  Enables growth of the company and expansion of the product line etc.

Slide 12I Roles and Responsibilities  Shareholders  Directors  Officers (CEO, COO, CFO, CIO)  Executives (President, Secretary, Treasurer, etc.)

Limits Liability  Shareholders, officers, directors, and executives (and employees) are not personally liable for the debts of the business  Reduced risk encourages investment and innovation Slide 12J

Enables Growth  Capital is required for growth  Shares can be issued to pay for supplies or higher talent (especially for a cash poor startup)  Shares issued by startups often have a high ROI (return on investment) Slide 12K

Other Business Entities  Partnership  Limited Liability Company (LLC)  Sole proprietorship Slide 12L

The Big Picture Slide 12M The corporate world is full of titles, duties, roles, responsibilities, and formalities. Innovation team members formalize their relationship by joining together as a business entity. Forming a corporation enables them to clearly establish members’ duties, responsibilities, and rights. Functioning as a corporation makes it easier to meet capital needs and manage risk. Corporations issue shares to members, representing a percentage of equity/ownership in the company. Startups can use stock as a means of growth, to attract investment, good employees, and pay for business operations. Officers and directors are responsible for running the corporation, and have duties and responsibilities unique to their position. Directors hold board meetings in parliamentary style.

Ponder and Predict  What would happen to commerce if great ideas never got any further than their innovator or inventor’s brains because of the costs of R&D or marketing? How does a startup find the money to fund development of a new and promising product? You have learned that capitalism inspires all sorts of ways to make a profit. In fact, there are businesses in the business of funding innovation. Who are these mysterious risk takers, and what do they get in return? Slide 12N