Corporations
Towers on the Business Landscape
What is a Corporation?
Important People in a Corporation
Stockholder
Board of Directors
Officer
The board of directors is the ruling body of the corporation. They are elected by the stockholders. The board oversights responsibilities and appoints officer to carry out the plans of the corporation. If the corporation begins to lose profit the board can step in and play an active role in operational management of a business. The board generally consists of 10 to 25 directors. People that are elected to the board usually have valuable knowledge needed by the board to make sound decisions.
Officers are the top executives and are hired to manage the business. They are appointed by the board of directors. The officers consist of a president, secretary, and treasurer. Some large corporations also have vice presidents in charge of areas such as marketing, finance, and manufacturing.
Close and Open Corporations
An open corporation is a corporation in which the stock for the business is made available for public sale. These are advertised through the newspaper or different websites. Open corporations have to have a prospectus. A prospectus is a formal summary of the chief features of the business and its stock offering.
Formation of Corporations
Operating a New Corporation
Management Issues for Corporations
Limited Liability- In a corporation the owners, directors, and managers are not legally liable for the debt of the corporation beyond their investment in the stocks.
Permanency of Existence- A corporation is a more permanent business type than proprietorship and partnerships. Directors and managers can change over time without affecting the operation or ownership of a corporation.
Ease in Transferring Ownership- It is easy to transfer ownership of a corporation because whenever a stock is sold the person buying the stock receives a certificate saying hey own a certain part of the business.
Taxation- A corporation is subject to more taxes than a proprietorship or partnership. They pay a filing fee, organization tax, and an annual state tax.
Government Regulations- Corporations cannot be started and ran however you please. You have to have a charter to start a corporation. There are also state rules and regulations limiting what type of business activities you can do. the federal government requires firms whose stock is publicly traded publish financial data.
Stockholders' Records- All stockholders must be informed on corporate matters, notified of meetings, and given the right to vote no matter how few stocks they own.
Charter Restrictions- A corporation can only engage in activities that are listed on its charter. They cannot change what they sell without getting government approval.
Agency Dilemma- An agency dilemma is whenever an agent looks for their own interests instead of their employers. Managers in a company may think about what is best for them but not for the various stockholders of the corporation.