By: Caroline Mooney

The structure of Corporations

The definition of a corporation is a business owned by a group of people and authorized by the state. Corporations are few in number, but generally large in size. Corporations employ millions of people and they also play a powerful role in this country.

How to start a Corporation

There are many things that you need to do in order to start and begin a corporation. First, you have to get permission to for one, and organizers must obtain a charter. A charter is a official document through which a stat grants the power to operate as a corporation.

What do Corporations do

A corporation can make contracts, borrow money, own property, and sue or be sued in its own name. Corporations employ millions of people, have many layers of managements, and provide consumers with many of the goods and services they use daily.

Three key types of People in Coroporations

  • Stockholders
  • Directors
  • Officers

The owners of a corporation are stockholders. The ownership is divided into equal parts called shares. A person who invests in a share can become a stockholder. Each stockholder has basic rights. Many of there abilities are transferring ownership to others, voting for members for the body of the corporation, receiving dividends, buying new shares, and sharing in the net proceeds. Also, if the corporation fails, a stockholder can lose only the money invested.

The board of director is the ruling body of the corporation. Like said before, the stockholders elect the board members. Directs have many responsibilities including developing plans and policies to guide the corporation and appoint officers to carry out the plans. In large corporations, the boards usually consist of 10 to 25 directors. Often, directors are stockholders who hold many shares.

The officers of the corporation re the top and head executives who are hired to manage the business. The board of directors usually appoint them. The officers in a small corporation often consist of a president, a secretary, and a treasurer. In large corporations, may have vice presidents in charge of some area such as finance, marketing, and manufacturing. The top officer of the corporation is called a CEO. It stands for the chief executive officer and they are the head financial officer of the CFO, which stands for the chief financial officer.

The two different types of Corporations

  • Close corporation
  • Open corporation

A close corporation is a corporation that does not offer its shares of stock for public sale. Some stockholders may run it but some of them may help run the business in the same manner that partners operate the business. In some states, a close corporation does not need to make its financial activities known to the public. In addition, it must prepare reports for tax purposes for all states that it operates in.

A open corporation is a corporation that offers its shares of stock for public sale. One of the ways these corporations announce the sale of common stock to the public is to produce an ad in the newspaper. Te corporation must file a registration statement, called a prospectus. A prospectus is a formal summary of the chief features of the business and its stock offering.

The formation of a Corporations

The first thing you need to do is decide on a series of management decisions and about how the corporation should be organized. Next thing you should do is the proper legal forms have to be prepared and sent to the state office that handled such matters. Lastly, the state would review the incorporation papers and issue a charter if it approved.

Operating a new corporation

The first thing you need to to do is get organized by preparing a balance sheet or statement of financial positions.

Management Issues for corporations

The corporation can help to solve some of the management issues found with proprietorship and partnerships. A corporation can obtain money from several sources, and is the sale of shares to stockholders. People usually invest more willingly to proprietorship's and partnerships. Corporations usually find borrowing large sums of money less of a problem than proprietorship's and partnerships.