PowerPoint Section 8-2

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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.
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