1. Ch. 8 sec. 2 & 3 Corporations and Franchises
Economics
Ch. 8 sec. 2 & 3
Corporations and Franchises

3. Corporation
Legal entity with an existence that is distinct from the people who organize, own, and run it
5 million corporations in U.S.
Sales range from $100,000 to $499,999
20% of all businesses and 90% of all products

5. Types of Corporations Private Publicly Traded
Ownership is limited to a few people, only family members, shares are not publicly traded
Mars, Meijer, Enterprise, Menard, Levi Strauss & Co
Publicly Traded
Owned by many shareholders, shares sold publicly
Nike, McDonalds, Microsoft, Apple, Aeropostale

6. Advantages Of Corporations
Benefits For Stockholders:
If A Company Fails- The Loss To Stockholders Is Limited To The Amount They Invested
Stockholders May Take Back Part or all Of Their Investment By Selling Stock

7. Advantages Of Corporations
Limited Liability For Corporation’s Founders- The Corporation Assumes Financial and Legal Responsibilities.
Management- Departments Are Formed To Efficiently Handle The Problems Of Running A Business
Easy To Raise Capital- Adding Share Holders Will Generate Revenue That Will Help The Business Grow

8. Disadvantages
Strong Government Regulation- Business Practices Are Closely Watched By The Government.
Taxes- Corporations Pay A Higher Tax On The Profit They Earn.
Slow Decision Making Process- The Amount Of People Involved Makes Decision Making A Slow Process

9. Disadvantage continued
Stockholders Are Removed From The Daily Operations Of The Business and Have Little Control.
(This May Be Both Good and Bad)

10. S Corporation
Organization that offers limited liability combined with the single taxation of business income
Must have 75 stockholders w/no foreign stockholders

11. Limited Liability Company (LLC)
Business w/limited liability for some owners
Single Taxation
NO ownership restrictions

12. Mergers Horizontal Mergers Vertical Mergers Conglomerate
2 or more firms competing in the same market
Daimler-Benz and Chrysler, Cingular and AT&T
XM Radio and Sirus
Vertical Mergers
2 or more firms involved in different stages of producing the same good or service
Time Warner Incorporated, a major cable operation, and the Turner Corporation, which produces CNN, TBS, and other programming
Conglomerate
Business combination merging more than 3 businesses that make unrelated products
Walt Disney and ABC

14. Multinational Corporations (MNC’s)
Large corporations that produces and sells its goods and services throughout the world
Red Bull
Sony
American Express
SunDisk
Nike
Nintendo
McDonalds
Walt Disney Company

17. Structure Of Corporations
Cooperatives- a business collectively by a group of people.
An apartment complex
Nonprofit Organization- provides goods and services without earning a profit

18. Franchises
Semi-independent business that pays fees to a parent company in return for the exclusive right to sell a certain product or service in a given area

19. Advantages Management training and support Standardized quality
National advertising program
Financial assistance
Centralized borrowing power

20. Disadvantages High franchising fees and royalties
Strict operating schedule
Purchasing restrictions
Limited Product line