Corporations
 90%
of all businesses in the U.S. are set up as
Corporations
 Corporation
is a body formed & authorized
by law to act as a single person, distinct
from its members
 40
% of all corporations have less than 5
employees
Ownership
 Stockholder
(shareholder) is an individual
who owns shares of a corporation
 Share
is a single unit of ownership of a
corporation
Advantages of a Corporation
 Selling
shares enables a corp. to tap into a
large source of capital
 Liability
of each shareholder is limited to the
amount of money invested
 Continuity
of existence – corporation
continues to exist regardless of the lifespan
of its founders & shareholders
 Corporation
is a legal entity or legal person
created by the state.
Disadvantages of a Corporation
 Income

is taxed more than once
Company Profits & Dividends (profit share
received by shareholders)
 Extensive
Government regulation
 Formation
must be followed exactly to avoid
legal difficulties
 Original
founders can lose control or
ownership of corporation
Types of Corporations
 Public
 Profit
/ Private
/ Non-Profit
 Domestic
 Stock
/ Foreign / Alien
/ Nonstock
Types of Corporations
 Public

Public corporations are those whose stock has
been made available for the public to purchase


/ Private
Only For Profit
Private corporations can be profit or nonprofit


only those employed or originally invested in the
company own stock. (stock company)
It can also be a company with no stock and only
original investors. (nonstock company)
Types of Corporations
 Profit
/ Non-Profit

Profit companies formed to make $ or profit

Non-Profit companies are formed for charitable
or social or religious purposes





Private school
AIDs Foundation
Habitat for Humanity
Salt & Light
Salvation Army
Types of Corporations
 Domestic
/ Foreign / Alien

Domestic – created in USA

Foreign – created in a different state in USA

Alien – created in another country
Forming A Corporation
 Each
state has it’s own version of corporate
law
 If
a sole proprietor or partnership wants to
change into a corporation – they must start
“from scratch” as a corporation. The old
business “dies”
Forming A Corporation
3



Main Steps
Choose a name
Complete the Articles of Incorporation
Receive the Certificate of Incorporation
 Name:
Corporation, Incorporated, Company
listed at end of name




Apple Corporation
Wal-Mart Stores, Incorporated
Ford Motor Company
Can not use the name of an existing company or
one that is similar.
Articles of Incorporation
 Articles
of Incorporation an application for
incorporation that describes its organization,
powers and authority.







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Name
Duration
Purpose
Number, Class & Value of corporate shares
Shareholder’s Rights
Address of original registered agent
Names & Signatures of initial directors
Names & Signatures of Incorporation
Certificate of Incorporation
 Certificate
of Incorporation also called a
charter is the official certificate that
authorizes a corporation to do biz in a state.
 Structure



of a Corporation
Board of Directors
Chairman of the Board (think Mr. Monopoly)
Officers (who manage company)
Financing
 Sale of stock is most common

Common Stock



(shares in company)
Gives voting rights in a corporation
Provides dividends that are not guaranteed
Preferred Stock



No voting rights
Guarantees fixed dividends
Priority over common stock holders
 Sale
of bonds also fund
(notes issued in return for
money borrowed)
 Accrue (accumulate) interest and must be repaid
 In event of bankruptcy they are paid before
shareholders
Limited Liability Corporation
 Features best of a partnership and a
corporation


Limited liability to owners
Escapes double taxation
 Legal

Problems with Incorporation
De jure = in law or lawful company (corp. are de
jure when they being and have Cert of Incorp.)


De Facto Corp = When a corp does not exist in law but
does exist in fact (de facto)
Estoppel – When court treats a person or group of
people as a corporation. Used when court prevents
someone from denying they were acting like a corp.