2. Corporations Most complicated form of business structure It is a legal entity (an individual) Owned by individual stockholders They have limited liability They buy stock – a document that shows they have paid money to be a part-owner of the corporation

3. Corporations It’s own legal identity??? It can make contracts It can sue It can be sued It pays its own taxes It can make donations to political causes

4. Corporate Structure

5. Stockholders invest money into the company. They get dividends a vote for Board of Directors members

6. Corporate Structure The Board of Directors selects the President also known as CEO (Chief Executive Officer) to run the business

7. Corporate Structure The President selects corporate officers to help administer the company. They usually are Chief Operating Officer (COO) – day to day operations Chief Financial Officer (CFO) – financial matters Secretary – paperwork

8. Corporate Structure The Corporate Officers oversee the workforce who do the everyday labor

9. Corporations

10. Types of Corporations Closely held All or almost all stocks are sold to family members Family members pass stocks to other family members Keeps it out of other people’s hands Publicly held Open to the public to buy and sell stock Stock is sold on a “stock market” or “stock exchange”

11. Corporate Advantages Investors Limited liability Investors (stockholders) can only lose amount of money they put into the company Lawsuits paid by corporate funds, not invested funds Flexibility Easy to transfer stocks

12. Corporate Advantages To the Company Opportunity to grow Sell stocks Sell bonds Bonds are IOUs No ownership involved Has the funds to hire the BEST Long life

13. Disadvantages Difficult to start up A LOT of paperwork Double Taxation Corporate profits are taxed Investor dividends are taxed Capital gains from sales of stock are taxed Original owners lose some degree of control A LOT of government regulations

14. Corporate Combinations Growth through mergers Horizontal Merger Combine with another company Both companies supply the same good or service

15. Corporate Combinations Growth through mergers Vertical Merger. Combine with. another company. The companies deliver different goods which work together to. Deliver a final good

16. Corporate Combinations Conglomerations Two or more companies join together The products the companies make are completely unrelated

17. Corporations Multinational Corporations Companies (corporations) which exist in Many (multi) different Countries (national)