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8-3: Corporations, Mergers, and Multinationals. Characteristics of Corporations. Corporation: business owned by stockholders These shareholders have limited liability for the company’s debts and losses

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Presentation Transcript
characteristics of corporations
Characteristics of Corporations
  • Corporation: business owned by stockholders
    • These shareholders have limited liability for the company’s debts and losses
    • They acquire ownership through the purchase of stock—shares of ownership in the corporation
characteristics of corporations continued
Characteristics of Corporations (continued)
  • If a company does well and earns a profit, stockholders may receive dividends—part of the profit paid to stockholders
characteristics of corporations continued1
Characteristics of Corporations (continued)
  • Corporations make up 20% of all businesses in the U.S.
  • Public corporation: a corporation that issues stock that can be freely bought and sold
characteristics of corporations continued2
Characteristics of Corporations (continued)
  • Private corporation: corporation that retains control over who can buy and sell the stock
advantages of corporations
Advantages of Corporations
  • Access to resources: Easy to raise money through the sale of stocks and bonds
    • Bonds: a contract issued by a corporation that promises to repay borrowed money plus interest, on a fixed schedule
advantages of corporations continued
Advantages of Corporations (continued)
  • Professional managers: CEOs, etc. are in charge of the corporation
  • Limited liability for debts/losses
advantages of corporations continued1
Advantages of Corporations (continued)
  • Unlimited life: they continue to exist even after a change in ownership
disadvantages of corporations
Disadvantages of Corporations
  • Start-up cost and effort: expensive and lots of paperwork
  • Heavy regulations: stockholders meetings and annual reports
disadvantages of corporations continued
Disadvantages of Corporations (continued)
  • Double taxation: must pay taxes on profits and on dividends—the corporate profits paid to stockholders
  • Loss of control: some control may be lost to the board of directors
business consolidation
Business Consolidation
  • Horizontal merger: when 2 companies that produce the same product merge
    • Example: car companies
business consolidation continued
Business Consolidation (continued)
  • Vertical merger: when 2 companies involved in different steps of marketing/producing a specific product merge
business consolidation continued1
Business Consolidation (continued)
  • Conglomerate: the merger of companies that produce unrelated products
business consolidation continued2
Business Consolidation (continued)
  • Multinational corporation: a large corporation with branches in several countries
    • Example: General Electric
franchise
Franchise
  • Franchise: business made up of semi-independent businesses that offer the same products or services
    • Example: McDonald’s
advantages of franchises
Advantages of Franchises
  • Proven/well-known product
  • Training in how to run the business is given
  • Franchiser pays for advertising
disadvantages of franchises
Disadvantages of Franchises
  • Start-up costs
  • Sharing profits with franchiser
  • Must follow franchisers’ rules
cooperatives
Cooperatives
  • Cooperative: business operated for the shared benefit of its owner, who are also its customers
  • Examples: credit unions, producer’s co-ops, etc.
nonprofit organization
Nonprofit Organization
  • Nonprofit organization: institution that acts like a business organization but its purpose is to benefit society not to make a profit
  • Example: Habitat for Humanity
questions
Questions
  • 1. What are the benefits of forming a conglomerate?
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3. What would be the outcome of raising the fees and requiring more paperwork in order to start a corporation?