The structure of Corporations
Close and open Corporations
An Open Corporation is one that offers its share of stocks for public sales. One way to announce the sale of common stock to the public is with an ad in the newspaper. The corporation must file a registration statement with the securities and exchange commission (SEC) containing extensive details about the corporation and the proposed issue of stock. A condensed version of this registration statement, called a prospectus, must be furnished to each prospective buyer of newly offered stocks (or bonds).
A prospectus is a formal summary of the chief features of the business and its stock offering.
Certificate of Incorporation
Naming the Business
Stating the purpose of the Business
Management Issues for Corporations
Sources of Capital: A corporation can obtain money from several sources. One of those sources is the sale of shares to stockholders. Because corporations are regulated closely, people usually invest more willingly than in proprietorships and partnerships.
Limited Liability: Except in a few situations, the owners (stockholders), directors, and managers are not legally liable for the debts of the corporation beyond their investment in the stock shares purchased. Stockholders are more willing to invest in a corporation when there is no possibility of incurring a liability beyond their original investment.