Page 150 - Business Principles and Management

Chapter 6 • Corporate Forms of Business Ownership

6.1 Corporations

Goals Terms
• Explain the basic structure of a • corporation • dividends
corporation. • charter (certificate • board of directors
• Describe how a corporation is of incorporation) (directors, board)
formed and organized. • stockholders • officers
(shareholders) • capital stock (stock)
• shares • proxy

n Chapter 5, you learned about proprietorships and partnerships as legal
forms of organizing a business. This chapter will deal with the features and
Iformation of corporations. In addition, you will learn about special organi-
zational structures: limited liability companies, joint ventures, virtual corpora-
tions, nonprofit corporations, and cooperatives. If you were to join the three
people in the opening story at their luncheon meeting tomorrow, you would
need to understand the contents of this chapter.

Corporate Structure

Corporations are towers on the business landscape. Although proprietorships are
many in number, they are generally small in size. In comparison, corporations are
few in number, but generally large in size. Because corporations tend to be large,
they play a powerful role in this country and in others. For example, corporations
employ millions of people and provide consumers with many of the goods and
services they need and want. In a recent year, corporate sales of goods and services
were more than 17 times greater than sales from proprietorships, and more than
16 times greater than sales from partnerships in the United States.
Not all corporations are large. Corporations such as Ford, IBM, and Wal-Mart
are known to almost everyone, but many small corporations also exist. Small facts
corporations are popular for reasons you will discover later in this chapter. &
Because the corporation plays a vital role in business, we need to understand
its basic features as well as its advantages and disadvantages. To gain knowledge figures
of the basic features of the corporation, we can follow York, Burton, and Chan
as they consider incorporating their fast-growing food store partnership, which
they launched in the last chapter. Business experts believe that
in the 21st century, corporate
boards will need one or more
BASIC FEATURES
directors with expertise in
Elena Morales, a lawyer, helped York, Burton, and Chan prepare the partner- these areas: telecommunica-
ship agreement under which they now operate. The partners asked Elena to tions and technology, market-
describe a corporation to them. She stated that a corporation is a business owned ing, international markets,
by a group of people and authorized by the state in which it is located to act as top-level finance, restructur-
though it were a single person, separate from its owners. To get permission to ing, entrepreneurial skills,
form a corporation, organizers must obtain a charter. A charter (often called and service industries.

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