1. Chapter 6 Corporate Forms of Business Ownership
Corporations
Basic Features of a Corporation
Formation of Corporations
Closed and Open Corporations
Specialized Types of Organizations

2. Corporations Corporations are small in number but large in size
Corporations employ millions of people and provide consumers with goods and services that they need and want.
Corporation - business owned by a group of people and authorized by the state (charter) to act as though it were a single person.
A corporation can make contracts, borrow money, own property, sue and be sued.

3. Formation of Corporations
Certificate of Incorporation
Name the Business
State the Purpose of the Business
Invest in the business - Capital Stock
Pay Incorporation Costs/Fees
There are three key types of people in corporations:
Stockholders
Directors
Officers

4. Stockholders
Stockholders are the owners of the corporation. Ownership is divided into equal parts called shares. Thousands can own the corporation
Rights of Stockholders -
To Transfer Ownership to Others
To vote for members of the ruling body
To receive dividends
To buy new shares of stock
To share in the net proceeds
There is no liability beyond the extent of the stockholder’s ownership. If the corporation fails they will only lose the amount invested. (limited liability)

5. Ruling Body of Corporations
Directors or Board of Directors - is the ruling body of the corporation. Board members are elected by the stockholders. Often the BOD are the stockholders which own many shares of stock.
Usually about 10 to 25 members a few are usually top execs from the company. College professors, and executives from other companies usually are appointed because of their vast knowledge.

6. Officers
Officers - are the top executives who are hired to manage the business. They are appointed by the BOD. The titles are usually:
CEO, Chief Executive Officer
COO, Chief Operating Officer
CFO, Chief Financial Officer
CIO, Chief Information Officer

7. Close vs. Open Corporations
Close Corporation - (a.k.a.. Closely Held Corporation) - is one that does not offer its shares of stock for public sale. The partners of the business own and operate the business. These businesses do not need to make their financials public.
Open Corporation - (a.k.a. Publicly Owned Corporation) is one that offers its shares of stock for public sale. This type of corporation can raise large amounts of capital. Must provide stockholders with Financial Statements.

8. Advantages of Corporations
Available Sources of Capital
Limited Liability of Stockholders
Permanency of Existence
Ease in Transferring Ownership

9. Disadvantages of Corporations
Double Taxation
Government Regulations & Reports
Extensive Record Keeping
Stockholders Records
Charter Restrictions

10. Specialized Types of Organizations
Joint Ventures - an agreement involving two or more businesses to make/sell a good or service.
Virtual Corporation – forming temporary alliances to take advantage of fast-changing market conditions.
Limited Liability Companies – taxed as sole proprietorships, limited liability however, certain rules apply. No more than 35 shareholders etc.. See rules on page 155.

11. Specialized Types of Organizations (cont.’...)
Non-Profit Organizations - an organization that does not pay taxes and does not exist to make a profit. They do not pay dividends to stockholders (Boy Scouts, United Way, Hospitals)
Quasi-Public Corporations – a business that is important to society but does not have the funds to attract investors may be run by the local, state or federal government (Water & Sewer Systems)