The Corporation SECTION 8-2 What is a corporation? A corporation is a business organization that operates as a legal entity that is separate from its owners and is treated by law as if it were an individual person. Can sue or be sued 20 % of all business are corporations Starting a Corporation 1. File an application with the state (articles of incorporation) 2. Write a set of corporate bylaws (rules by which a corporation will operate) 3. After application is approved, a corporate charter is issued (license to operate) Issuing Stock Closely Held Corporations-one whose shares are owned by a relatively small group of people (maybe 3 or 4) Publicly Held Corporations- one that sells its shares openly in the stock market where anyone can buy them Going Public- when a closely held corporation decides to sell its stock in the stock market Advantages of the Corporation 1. Ability to raise capital- sell more stock 2. Limited liability- owners won’t lose a lot of their own money 3. Continued life 4. Separation of ownership and management Disadvantages of a Corporation 1. Complex and expensive set-up 2. Slow decision making process 3. Taxes Franchise Not a form of business ownership A franchise is a contractual agreement to sell a company’s products or serviced in a designated geographic area McDonald’s, Subway, Taco Bell, Red Lobster Which form of business ownership is best? Choose the one that best fits your need. Often, corporations start out as a sole proprietorship or partnership.