Chapter 8: Business Organizations

Section 3: Corporations, Mergers

and Multinationals

CorporationsMost complicated form of business structureIt is a legal entity (an individual)Owned by individual stockholders

They have limited liabilityThey buy stock – a document that shows they

have paid money to be a part-owner of the corporation

CorporationsIt’s own legal identity???

It can make contractsIt can sueIt can be suedIt pays its own taxesIt can make donations to political causes

Corporate Structure

Corporate Structure

Stockholders invest money into the company. They getdividendsa vote for Board of Directors members

Corporate Structure

The Board of Directors selects the President also known as CEO (Chief Executive Officer) to run the business

Corporate Structure The President selects corporate officers to help

administer the company. They usually are

Chief Operating Officer (COO) – day to day operations

Chief Financial Officer (CFO) – financial matters

Secretary – paperwork

Corporate Structure

The Corporate Officers oversee the workforce who do the everyday labor

Corporations

Types of CorporationsClosely held

All or almost all stocks are sold to family members

Family members pass stocks to other family members

Keeps it out of other people’s hands

Publicly heldOpen to the public to buy and sell stockStock is sold on a “stock market” or “stock

exchange”

Corporate AdvantagesInvestors

Limited liabilityInvestors (stockholders) can only lose

amount of money they put into the company

Lawsuits paid by corporate funds, not invested funds

FlexibilityEasy to transfer stocks

Corporate AdvantagesTo the Company

Opportunity to growSell stocksSell bonds

Bonds are IOUsNo ownership involved

Has the funds to hire the BEST Long life

DisadvantagesDifficult to start up

A LOT of paperworkDouble Taxation

Corporate profits are taxedInvestor dividends are taxedCapital gains from sales of stock are taxed

Original owners lose some degree of controlA LOT of government regulations

Corporate CombinationsGrowth through mergers

Horizontal MergerCombine with another companyBoth companies

supply the same good or service

Corporate CombinationsGrowth through mergers

Vertical Merger .Combine with .

another company .The companies deliver

different goods which work together to .

Deliver a final good

Corporate CombinationsConglomerations

Two or more companies join togetherThe products the companies make are

completely unrelated

CorporationsMultinational Corporations

Companies (corporations) which exist inMany (multi) differentCountries (national)