Page 152 - Business Principles and Management

Chapter 6 • Corporate Forms of Business Ownership

OFFICERS The officers of a corporation are the top executives who are hired to
manage the business. The board of directors appoints them. The officers of a
small corporation often consist of a president, a secretary, and a treasurer. In
addition, large corporations may have vice presidents in charge of major areas,
such as marketing, finance, and manufacturing. The titles of these officers are
often shortened to letters. For example, the top officer is called a CEO (chief
executive officer) and the head financial officer is the CFO (chief financial officer).

CHECKPOINT
List the three key types of people in corporations.

Formation of Corporations

Over several months, York, Burton, and Chan asked their attorney, Elena Morales,
many questions. Only after careful thought did the partners decide to form a cor-
poration. Morales told them that there were basically three steps involved. First, a
series of decisions had to be made about how the corporation would be organized.
Second, the proper legal forms had to be prepared and sent to the state office that
handled such matters. And third, the state would review the incorporation papers
and issue a charter if it approved.

PREPARING THE CERTIFICATE OF INCORPORATION
Each state has its own laws for forming corporations. No federal law exists.
To incorporate a business, it is necessary in most states to file a certificate of
incorporation with the appropriate state office. Morales prepared the certifi-
cate of incorporation for York, Burton, and Chan shown in Figure 6-1.
Notice the general type of information called for in the certificate of incorpo-
ration. In addition to the firm name, purpose, and capital stock, it requires infor-
mation about the organizers.

NAMING THE BUSINESS A business is usually required by law to have a name that
indicates clearly that a corporation has been formed. Words or abbreviations
such as Corporation, Corp., Incorporated, or Inc. are used; see Figure 6-2 for
examples. The organizers have decided to name their corporation York, Burton,
and Chan, Inc.

STATING THE PURPOSE OF THE BUSINESS A certificate of incorporation requires a cor-
poration to describe its purpose clearly. In Figure 6-1, Article 3 precisely states
the purpose of the corporation: to operate a retail food business. It allows the
corporation to expand into new food lines, but it does not allow the corporation
to start nonfood operations. For major changes in purpose, a new request must
be submitted and approved by the state.

INVESTING IN THE BUSINESS The certificate of incorporation could not be com-
pleted until York, Burton, and Chan decided how to invest their partnership
holdings in the corporation. They agreed that the assets and debts of the part-
nership should be taken over by the corporation. They further agreed that

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