Chapter 6 Corporate Forms of Business Ownership 1 Chapter 6 Corporate Forms of Business Ownership ©2008 Thomson/South-Western
Chapter 6 Corporate Forms of Business Ownership1
Chapter 6Corporate Forms of Business Ownership
©2008 Thomson/South-Western
Chapter 6 Corporate Forms of Business Ownership2
Partnership agreements
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Partnership agreement answers
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Lesson 6.1 Corporations
Goals Explain the basic structure of a corporation. Describe how a corporation is formed and
organized.
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Corporations
Corporation — business owned by a group of people and authorized by the state in which it is located to act as though it were a single person, separate from its owners
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Size of Corporations sales vs.
17 X Greater
16 X Greater
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Basic Features of a Corporation
Charter (certificate of incorporation) — official document through which a state grants the power to operate as a corporation
Stockholders — owners of the corporation
– Shares — equal parts of ownership– Dividends — profits distributed to
stockholders on a per-share basis
New Jersey Approved Corporation
Business Class, Inc.
New Jersey Approved Corporation
Business Class, Inc.
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Basic Features of a Corporation
Board of directors — ruling body of the corporation – ELECTED by Stockholders to plan and lead.
Officers — top executives hired by Board to manage the business, president, secretary, treasurer, CEO, CFO
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Formation of a Corporation
Prepare the certificate of incorporation1. Name the business
2. State the purpose of the business
3. Invest in the business
4. Pay incorporation costs
Operate the new corporation– Get organized Balance sheet, stock not money– Handle voting rights 1 stock = 1 vote
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Right of Stockholders
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Corporation advantages
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Corporate Disadvantages
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Stock voting example
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Lesson 6.2 Close and Open Corporations
Goals Distinguish between close and open
corporations. Explain the major advantages of the
corporate form of business. Explain the major disadvantages of the
corporate form of business.
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Close and Open Corporations
Close corporation Also called closely held corporation Does not offer shares of stock for public
sale Owned by just a few stockholdersOpen corporation Also called publicly owned corporation Offers shares of stock for public sale Has large number of stockholders
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Advantages and Disadvantages of Corporations
Advantages Available sources of
capital Limited liability of
stockholders Permanency of
existence Ease in transferring
ownership
Disadvantages Taxation Government
regulations and reports Stockholders’ records Charter restrictions
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What types of Businesses are suited to being Corporations?
Businesses that require a large amount of Capital i.e. hotels, Auto manufacturers etc.
Businesses with uncertain futures i.e. new magazine, amusement parks because of the risk involved
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Board of Directors of Nike
Mark G. Parker President and Chief Executive Officer of NIKE, Inc. John G. Connors Partner in a venture capital firm. Timothy D. Cook Chief Operating Officer of Apple Computer Jill K. Conway, Visiting scholar from MIT in science, technology and society. Ralph D. DeNuzion, age 72, President of an investment firm Alan B. Graf Executive Vice President and Chief Financial Officer of
FedEx. Douglas G. Houser Partner in the Portland, Oregon law firm Jeanne P. Jackson Founder and chief executive officer of MSP Capital, a
private investment company. Ms. Jackson was chief executive officer of Walmart.com from March 2000 to January 2002. She was with Gap, Inc., as president and chief executive officer of Banana Republic. She has held various retail management positions with Victoria’s Secret, The Walt Disney Company, Saks Fifth Avenue and Federated Department Stores. Ms. Jackson is a trustee of the United States Ski and Snowboard Team and serves on the board of advisors of the Harvard Graduate School of Business. She is also a director of McDonald’s, Nordstrom and Williams-Sonoma.
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Questions
A corporation that does not offer its stock to the public for sale is a(n)
Close Corporation Open Corporation Private Corporation None of the above.
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Questions
The advantages of a corporate form of ownership include all of the following except
Double taxation Available sources of capital Limited liability Permanency of existence
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Lesson 6.3 Specialized Types of Organizations
Goals Describe organizations that are specialized
alliances between companies or individuals. Describe specialized forms of corporations
formed for tax or nonprofit reasons.
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Organizational Alliances
Joint venture — agreement among two or more businesses to work together to provide a good or service.
Example: NUMMI AutoAlliance Ford and Mazda Sony-Ericsson, Baseball Network (ABC, NBC and Major League Baseball)
Verizon Wireless (Verizon and Vodafone)
XFL – NBC and World Wresting Entertainment
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Organizational Alliances
Virtual corporation — network of companies that form alliances among themselves as needed to take advantage of fast-changing market conditions
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Virtual Corporation
A. Wants to sell a specialized computer.
B. Has some parts needed
C. Has some additional parts needed.
D. Knows people who could use the computer.
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Cooperatives
Cooperative — business owned and operated by user-members for the purpose of supplying themselves with goods and services
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Other Limited Liability Corporations
Limited liability company (LLC) or Subchapter S corporation — special type of corporation allowed that is taxed as if it were a sole proprietorship or partnership
_ Less than 100 stockholders– Domestic company and no Non-resident aliens as
stockholders– Only one class of stock, NO DOUBLE TAXATION
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Other Limited Liability Corporations
Nonprofit corporation — organization that does not pay taxes and does not exist to make a profit ELKS, Masons, Local Hospitals, Girl Scouts.
Quasi-public corporation — business that is important to society, lacks profit potential, and is often run by local, state, or federal government Turnpike, water and sewer