The Structure of Corporations
By: Chris Hutchins
Basic Features
A corporation is a business owned by a group of people and authorized by the state in which it is located to act as though it were a single person, separate from owners. To get permission to form a corporation, organizers must obtain a charter.
A charter is the official document through which a state grants the power to operate as a corporation.
StockHolders
The owners of a corporation are stockholders. Ownership is divided into equal parts called shares. A person who buys one share becomes a stockholder or shareholder. Stockholders have a number of basic rights. Such as....
- Transfer ownership to others
- Vote for members of the ruling body of the corporation
- Receive dividends. Dividends are profits that are distribute to stockholders on a per-share basis
- Buy new shares of stock in proportion to one's present investment should the corporation issue more shares.
- Shares in the net proceeds- should the corporation go out of business
More on StockHolders
Stockholders does not have the same financial responsibility as a partner, no liability beyond the stockholder's ownership. If a corporation FAILS then a stockholder can lose only the money invested
Directors
Officers
Close and Open Corporations
A Close corporation is one that does not offer its shares of stock for pubic sale. Just a few stockholders own it, some of them may help run the business in the same manner that partners operate a business. Close corporation does not need to make its financial activities known to the public. Its stock-not offered for general sale.
A Open corporation-one that offers its shares of stock for public sale, The corporation must file a registration statement with the Securities and Exchange Commission- containing extensive details about the corporation and the proposed issue of stock.
A prospectus is a formal summary of the chief features of the business and its stock offering.
Stating The Purpose Of The Business
Handing Voting Rights
Source of Capital
One source- is the sale of shares to stockholders
People usually invest more willingly than in proprietorships and partnerships. Find borrowing large sums of money less of a problem than do proprietorships or partnerships.