Corporatoins
A corporation is a business owned by a group of people and authorized by the state in which is located to act as though it was a single person.
The structure of corporations
Corporations are towers on the business landscape. Corporations employ millions of people, have many layers of management, and provide consumers with many goods and services they use daily. Examples of a corporation would be Ford, Apple, and Walmart which are well known by most people.
A charter
A charter ( often called a certificate of incorporation) is the official document through which a state grants the power to operate as a corporation.
Stockholders
Stockholders are the owners of a corporation. Ownership is divided equally into parts called shares. Each stockholder receives a certificate from the corporation which shows the number of shares owned.
The board of directors
Stockholders are the owners of a corporation. Ownership is divided equally into parts called shares. Each stockholder receives a certificate from the corporation which shows the number of shares owned.
The board of directors is the ruling body of the corporation. The stockholders elect board members. Directors have the management oversight responsibilities to develop plans and policies to guide the corporation as well appoint officers to carry out plans.
The officers
The officers of a corporation are the top executives who are hired to manage the business. The board of directors appoints them. The officers of a small corporation often consists of a president, a secretary, and a treasurer.Large corporations may have vice presidents in charge of marketing, finance, and manufacturing.
open and closed corporations
An open corporation is one that offers its shares of stock to public sale.The corporation must file a registration statement with the securities and exchange commission containing detail about the corporation and proposed issue of stock.
A closed corporation is one that does not offer its shares to the public. Just a few stockholders own it; some of them help run the business in the same manner that partners operate a business.
Forming a corporation
First, a series of management decisions need to be made about how the corporation would be organized. Second, the proper legal forms had to be prepared and sent to the state office that handled such matters. Third, the state would review the incorporation papers and issue a charter if it approved.
Naming a business
A business must have a name that states that it is a business so using corporation,corp., incorporated, or INC. A certificate of incorporation requires a corporation to describe its purpose clearly.
Investing in the business
The partners in the business need to be able to decide how they are going to invest into their business and how many shares they want to purchase.
Paying incorporation costs
Usually a new corporation must pay an organization tax, based on the amount of its capital stock. They also have to pay a filling fee before the state will issue a charter.
Sources of capital/ limited liability
-A corporation can obtain money from several different sources. One of the sources is the sale of shares to stockholders, because corporations are regulated closely people usually invest more willingly.
- The owners(stock holders), directors, and managers are not legally liable for the debts of the corporation beyond their investment in the stock shares purchased.
Ease in transferring ownership
it is easy to transfer an ownership in a corporation. A stockholder may sell stock to another person and transfer the stock certificate, which represents ownership, to the new owner.
Taxation
A corporation has unique taxes such as a filling fee, which is payable on application for a charter; An organization tax, which is based on the amount of authorized capital stock; an annual sales tax, based on the profits; and a federal income tax.
Government regulations and reports
To form a corporation, an application for a charter must be submitted to the appropriate state official, usually the secretary of state. Each state will probably require a corporation to obtain a license and pay a fee to do business in that state. Management must ensure that the corporation files special reports with the state from which it received its charter as well with other states. The federal government requires firms whose stock is publicly traded to publish financial data.
Stockholders records
Corporations that have many stockholders have added problems.By law stockholders must be informed of corporate matters, notified of meetings, and given the right to vote on important matters. Letters and reports must be sent to stock holders on a regular basis,
Charter restrictions
A corporation is allowed to engage only in those activities that are stated in its charter.
Agency dilemma
This can occur when an agent, or someone who works for another, pursues their own interest over their employers. An example would be that managers might try to persuade their board members to increase management pay, diminishing returns to stock holders. Corporate boards must ensure that managers perform their duties for the benefit of the corporation owners.