The towers on the Business Landscape
What is a Corporation?
Who owns a Corporation?
- Transferring of Ownership to others
- Vote for members in the body of the Corporation and other special decision that might be voted on my shareholders
- Receive dividends. Dividends are profits that are distributed to the stockholders based on how many shares they own. This decision is made by the ruling body of the corporation.
- Buy new shares of stock by proportion to a present investment should the corporation give out more shares.
- Share in the cash received from the sale of all assets should the corporation go out of business.
What is the Ruling Body of the Corporation?
Who are the top executives?
Preparing the Certificate of Incorporation
Stating the purpose of the Business- A certificate of incorporation requires a corporation to describe its purpose clearly. For example a retail food business. It allows the corporation to expand into a few new food lines, but it does not allow for the corporation to begin nonfood operations. For major changes in purpose, a new request muse be submitted and approved by the state.
Investing in the business- The certificate of incorporation could not be completed until to company decided how to invest their partnership holdings in the corporation. It is at this point that the partners can decide if the debts from the partnership carry over to the corporation. They also decide the value and number of stocks available to people.
Paying incorporation Costs- Usually a new corporation must pay an organization tax, based on the amount of its stock capital. A new corporation must also pay its fees before the stare will give them a charter entitling the business to become a corporation. Some state allow for the existence of the corporation to begin once the application or certificate of incorporation has been filed with a state agent.
Operating a new Corporation
Handling Voting Rights-Voting stockholders usually have one vote for every share owned. However if one of the partners were to sell their shares to another member of the partnership that partner would gain more than 50% of the company. Then the person with the most shares would gain control of that company.
Issues of a Corporation
Limited Liability- The owners, directors, and managers are not legally liable for the debts of the corporation beyond their investment in the stock purchased. Stockholders are more willing to invest in a corporation when there is no possibility of receiving liability. Directors and Managers may be willing to work with a corporation when they cannot be personally liable for debts of the corporation.
Permanency of Existence- The corporation is more permanent. It can continue to operate indefinitely or as long as the term stated in the charter. The death or withdrawal of an owner or stockholder does not effect the life of a corporation. Directors and managers can change over time without effecting the operation.
Ease in transferring ownership- It is easy to transfer ownership in a corporation. A stockholder may sell stock to another person and transfer the stock certificate, which represents ownership, to a new owner. When shares are transferred, the transfer of ownership is indicated into the record of the corporation. A new certificate is issued in the name of a new stockholder.