1. 8-3: Corporations, Mergers, and Multinationals

2. Characteristics of Corporations
Corporation: business owned by stockholders
These shareholders have limited liability for the company’s debts and losses
They acquire ownership through the purchase of stock—shares of ownership in the corporation

3. Characteristics of Corporations (continued)
If a company does well and earns a profit, stockholders may receive dividends—part of the profit paid to stockholders

5. Characteristics of Corporations (continued)
Corporations make up 20% of all businesses in the U.S.
Public corporation: a corporation that issues stock that can be freely bought and sold

6. Characteristics of Corporations (continued)
Private corporation: corporation that retains control over who can buy and sell the stock

7. Advantages of Corporations
Access to resources: Easy to raise money through the sale of stocks and bonds
Bonds: a contract issued by a corporation that promises to repay borrowed money plus interest, on a fixed schedule

8. Advantages of Corporations (continued)
Professional managers: CEOs, etc. are in charge of the corporation
Limited liability for debts/losses
Unlimited life: they continue to exist even after a change in ownership

9. Disadvantages of Corporations
Start-up cost and effort: expensive and lots of paperwork
Heavy regulations: stockholders meetings and annual reports

10. Disadvantages of Corporations (continued)
Double taxation: must pay taxes on profits and on dividends—the corporate profits paid to stockholders
Loss of control: some control may be lost to the board of directors

11. Business Consolidation
Horizontal merger: when 2 companies that produce the same product merge
Example: car companies

12. Business Consolidation (continued)
Vertical merger: when 2 companies involved in different steps of marketing/produ cing a specific product merge

14. Business Consolidation (continued)
Conglomerate: the merger of companies that produce unrelated products

15. Business Consolidation (continued)
Multinational corporation: a large corporation with branches in several countries
Example: General Electric

17. 8-4: Franchises, Co-ops, and Nonprofits

18. Franchise
Franchise: business made up of semi-independent businesses that offer the same products or services
Example: McDonald’s

19. Advantages of Franchises
Proven/well-known product
Training in how to run the business is given
Franchiser pays for advertising

20. Disadvantages of Franchises
Start-up costs
Sharing profits with franchiser
Must follow franchisers’ rules

21. Examples: credit unions, producer’s co-ops, etc.
Cooperatives
Cooperative: business operated for the shared benefit of its owner, who are also its customers
Examples: credit unions, producer’s co-ops, etc.

22. Nonprofit Organization
Nonprofit organization: institution that acts like a business organization but its purpose is to benefit society not to make a profit
Example: Habitat for Humanity