Corporation notes

Lesson 6.1 Corporations

Corporations

  • Corporations- 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 owner 

    • Corporations can sue, be sued, take out loans, and expand

      • Can go regional, local, or global 

Basic features of a corporation

  • Charter (certificate of incorporation)- official document through which a state grants the power to operate as a corporation

    • For that state

    • For another state have to fill out a separate form

      • What do you sell

        • Product or service

        • Be specific

    • States approve corporations as a by product for tax purposes, in addition if corporations hire the state can get tax dollars from the employees

  • Stockholders- owners of the corporation

    • Corporations do it to gain more capital such as expanding business

      • Buying more inventory, more innovation, etc

    • Shares- equal parts of ownership

    • Dividends- profits distributed to stockholders on a per share basis

      • Distributed to the shareholder every quarter 

      • Corporations share profits with shareholders

      • Public corporations 

  • Board of directors- ruling body of the corporation

    • Larger the corporation the larger board of directors you have 

    • Need an odd number

    • Comprised of retired business executives, current business executive in a different industry, college professors (knowledgeable in that industry)

      • Make decisions for the company ex. Decides to go global 

      • They are getting paid 

  • Officers- executives hired to manage the business

    • CEO- Chief executive officer

    • President 

    • Vice President

    • CMO- Chief marketing officer

    • CFO- Chief financial officer

    • CISO- Chief information system officer

    • COO- Chief operating officer

Formation of a corporation

  • Prepare the certificate of incorporation

    • Name the business

      • Has to communicate a corporation 

    • State the purpose of the business

    • Invest in the business

      • Where you get capital 

        • Bank loan- Pay back with interest 

        • venture capital - Equity 

    • Pay incorporation costs

  • Operate the new corporation

    • Get organized

    • Handle voting rights

proxy- a written authorization for someone to vote on behalf of the person signing the proxy

Lesson 6.2 Close and Open Corporations 


Close and Open Corporations

  • Close Corporation (Private Corporation

    • Also called closely held corporations

    • Does not offer shares of stock for public sale

    • Owned by just a few stockholders

      • Go public to gain capital 

      • More control

  • Open corporations

    • Also called publicly owned corporation

    • Offers shares of stock for public sale

    • Has large number of stockholders 


Advantages and Disadvantages of Corporations

Advantages

  • Available sources of capital

    • Typically have more assets

      • Venture capital

      • Bank loans

  • Limited liability of stockholders

    • If sued others are not sued

    • Detached from the entity

    • Will not lose anything besides investment

  • Permanency of existence

    • Lives on since its separate from owners and executives

  • Ease in transferring ownership

    • Able to purchase and sell stocks via exchange NASDAQ, NYSE

Disadvantages

  • Taxation

    • Corporate tax rate is 21%

    • Loopholes which could be an advantage if proprietorship is successful they pay more in taxes

  • Government regulations and reports

    • Abide by a lot of government documentation

      • Especially  if you want to trade your stocks, SCC

      • Need a lot of people to handle that=more money

  • Stockholders records

    • Abide by SCC, IRS, accounting regulation guidelines

  • Charter restrictions

    • Need a charter for each state


Lesson 6.3 Specialized types of organizations


Organizational Alliance

  • Joint venture- agreement among two or more businesses to work together to provide a good or service

    • Two or more organization

  • Virtual corporation- network of companies that form alliances among themselves as needed to take advantage of fast changing market conditions

    • Nike- network of companies that they utilize 

      • Manufacturers in oregon

      • Producers in asia

      • Holder- different stores 

    • Take variety of different areas of the sale of the products 

  • Cooperative business owned and operated by user members for the purpose of supplying themselves with goods or services

    • Farmers market



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

    • S Corp cannot be a bank, insurance company it can only have up to 100 investors, and all 100 have to be US citizens 

    • LLC any tax rate

    • S Corp have a fixed rate 

    • 501 (c ) 3

  • Nonprofit corporation- organization that does not pay taxes and does not exist to make a profit

    • Churches are tax exempt

      • Provide a good cause for the community 

  • Quasi public corporation- business that is important to society, lacks profit protention, and often run by local, state, or federal government

    • Utilities companies 

      • Owned business but government has influence to regulate prices