Corporations

Corporate Forms of Business Ownership

WHAT IS A CORPORATION?

A corporation is a business owned by a group of people and authorized by the state. To gain authorization from the government, they must first be granted access from the state and obtain a charter. Corporations are towers on the business landscape. As there may be much fewer of them compared to proprietorships, they are much larger scale and they play a powerful role in the United States and other countries. They employ much more people and have many more layers of management. Corporate sales were roughly 20x greater than the amount of sales from proprietorships.

CLOSE & OPEN CORPORATIONS

Open corporations are made to where the public is able to purchase shares, while Closed corporations are privately secured and only a few of the owners own the stocks.

POSITIONS

STOCKHOLDERS

Ownership of the business is divided up into shares between stockholders. The more shares you own, the greater the ownership. Stockholders are permitted basic rights as follows:

transferring ownership to others

have a vote in decisions and appointing officers

receive dividends

buy new shares

share in the net proceeds (taken from all business assets) if the company goes out of business.

BOARD OF DIRECTORS

They are the ruling body of the company. Stockholders elect board members to take responsibility of the overall management of the corporation. They develop plans and policies to implement in the company.

OFFICERS

Officers of a corporation are the top executives who are hired to manage the business. Businesses typically consist of a president, vice president, secretary, treasurer, CEO, CFO, etc. They are all accountable for major functions like financial assets, marketing, and manufacturing.

THE PROS

A corporation can obtain money from several sources which makes funding much more simplistic and efficient.


There is a limited liability to the owners and stockholders, and they are not legally liable for all debts beyond their investment.


It is very easy to transfer ownership and sell one's shares of the company. This allows the company to last much longer. Managers change over time without necessarily affecting the operation of ownership

THE CONS

The corporation is subject to much more taxation than a partnership or proprietorship


There is an abundant amount of red tape provided by the government. There are many different laws and policies that must be met in order to continue the business legally.


Must obtain charter submitted my the secretary of state in order to be granted access to initially start your business.