Chapter 6

1. Corporate Forms of Business Ownership Chapter 6 Chapter 6 Corporate Forms of Business Ownership

2. Lesson 6.1 Corporations Goals • Explain the basic structure of a corporation. • Describe how a corporation is formed and organized. Chapter 6 Corporate Forms of Business Ownership

3. Corporations • Corporation— • 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 owners • It may enter into contracts, borrow money, own property, sue in its own name. • Few in number and generally large in size. • Corporate sales 17 X’s greater than proprietorships. • Corporate sales 16 X’s greater than partnerships. Chapter 6 Corporate Forms of Business Ownership

4. Basic Features of a Corporation • Charter (certificate of incorporation) — • official document through which a state grants the power to operate as a corporation • Stockholders — • owners of the corporation • Shares — equal parts of ownership • Dividends — profits distributed to stockholders on a per-share basis • Board of directors — • ruling body of the corporation • elected by stockholders and develop plans and policies • may be from within the corporation or from other corporations or non-profit organizations—ie. College professors • Officers — • executives hired by the board to manage the business (cont’d) Chapter 6 Corporate Forms of Business Ownership

5. Officers–Small corp. President Secretary Treasurer Officers—Large corp. CEO CFO Vice President, Marketing Vice President, Manufacturing Basic Features of a Corporation Chapter 6 Corporate Forms of Business Ownership

6. Steven A. BurdChairman, President & Chief Executive Officer Paul HazenLead Independent Director Former Chairman and Chief Executive Officer Wells Fargo & Co. Janet  E.  GroveVice Chair of Macy's Department Stores, Inc. Mohan  GyaniVice Chairman Roamware, Inc. Former President and Chief Executive Officer AT&T Wireless Mobility Services, Inc. Frank  C.  HerringerChairman and Former Chief Executive Officer, Transamerica Corporation Kenneth W. OderFormer Executive Vice President, Safeway Inc. Managing Member, Sugar Hollow, LLC Arun SarinFormer Chief Executive Officer of Vodafone Group Plc. Michael S. ShannonManaging Director of KSL Capital Partners LLC. William Y. TauscherManaging Member The Tauscher Group Corporate Governance, Safeway, Inc.Board of Directors Chapter 6 Corporate Forms of Business Ownership

7. Steven A. BurdChairman, President & Chief Executive Officer Diane M. DietzExecutive Vice President & Chief Marketing Officer Robert  L.  EdwardsExecutive Vice President & Chief Financial Officer Bruce L. EveretteExecutive Vice President Retail Operations Larree M. RendaExecutive Vice President Chief Strategist and Administrative Officer David F.  BondSenior Vice PresidentFinance and Control (Chief Accounting Officer) David T. ChingSenior Vice President & Chief Information Officer Robert A. GordonSenior Vice President Secretary and General Counsel Chief Governance Officer Russell  M. JacksonSenior Vice President Human Resources Melissa C. PlaisanceSenior Vice President Finance and Investor Relations Kenneth M. ShachmutSenior Vice PresidentStrategic Initiatives, Health Initiatives and Reengineering David R. SternSenior Vice President Planning and Business Development Jerry TidwellSenior Vice PresidentSupply Operations Donald P. WrightSenior Vice President Real Estate and Engineering Corporate Governance, Safeway, Inc.Senior Management Chapter 6 Corporate Forms of Business Ownership

8. The Corporate Structure Stockholders Elect Directors Hire Officers President VP Treasurer Secretary 3 Chapter 6 Corporate Forms of Business Ownership 8

9. The Incorporation Process Select company’s name Write articles of incorporation Pay required fees and taxes Hold organizational meeting Adopt bylaws, elect directors, pass operating resolutions 3 Chapter 6 Corporate Forms of Business Ownership 9

10. Formation of a Corporation • Prepare the certificate of incorporation State controls the incorporation process. No Federal laws. • Name the business—Includes Corp., Corporation, Incorporated, or Inc. • State the purpose of the business—Clearly and concisely. --To operate a lawn service business. • Invest in the business • Pay incorporation costs—filing fee and tax based on capital stock. • Operate the new corporation • Get organized–prepare balance sheet | Organization Chart • Handle voting rights-equal or majority holder? • One vote per share. Chapter 6 Corporate Forms of Business Ownership

11. York Burton and Chan request $1,000,000 in capital stock. $100 per share. • How are the shares distributed each owner? Use the handout from chapter 5, balance sheets or page 123. • Prepare a balance sheet. • What happens to the unissued stocks? • Previous Slide Chapter 6 Corporate Forms of Business Ownership

12. Stockholders elect board members • Board of Directors select officers • Officers run the day to day activities. Chapter 6 Corporate Forms of Business Ownership

13. Lesson 6.2 Close and Open Corporations Goals • Distinguish between close and open corporations. • Explain the major advantages of the corporate form of business. • Explain the major disadvantages of the corporate form of business. Chapter 6 Corporate Forms of Business Ownership

14. Close and Open Corporations Close corporation • Also called closely held corporation • Does not offer shares of stock for public sale • Owned by just a few stockholders Open corporation • Also called publicly owned corporation • Offers shares of stock for public sale • Has large number of stockholders Chapter 6 Corporate Forms of Business Ownership

15. Advantages Available sources of capital Limited liability of stockholders Permanency of existence Ease in transferring ownership Disadvantages Taxation Government regulations and reports Stockholders’ records Charter restrictions Advantages and Disadvantages of Corporations Chapter 6 Corporate Forms of Business Ownership

16. Lesson 6.3 Specialized Types of Organizations Goals • Describe organizations that are specialized alliances between companies or individuals. • Describe specialized forms of corporations formed for tax or nonprofit reasons. Chapter 6 Corporate Forms of Business Ownership

17. Organizational Alliances • Joint venture— • agreement among two or more businesses to work together to provide a good or service • Virtual corporation — • network of companies that form alliances among themselves as needed to take advantage of fast-changing market conditions • Cooperative — • business owned and operated by user-members for the purpose of supplying themselves with goods and services Chapter 6 Corporate Forms of Business Ownership

18. Virtual Corporation Chapter 6 Corporate Forms of Business Ownership

19. 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 • limited liability • Nonprofit corporation — • organization that does not pay taxes and does not exist to make a profit • Quasi-public corporation — • business that is important to society, lacks profit potential, and is often run by local, state, or federal government • Government subsidies are required—government funding Chapter 6 Corporate Forms of Business Ownership