Book Opener

CHAPTERASSESSMENTSection 28.1 Corporations● A corporation is an entity created by law to act asa single person. About 90 percent of all businessin the United States is done by corporations. Acorporation is authorized by law to act as a singleperson, distinct from its members or owners. Notall corporations are large. Approximately 40 percentof all corporations employ fewer than fiveemployees. An individual who owns shares of acorporation is called a shareholder or stockholder.A share is a single unit of ownership of a corporation.A shareholder is entitled to one vote pershare of stock that he or she owns in a corporation.Shareholders can cast their votes to electa board of directors whose duty is to direct thecorporation’s business. The principal advantageof doing business as a corporation is the limitedliability of the shareholders. Another advantageof a corporation is the fact that it has continuityof existence. This means that a corporation continuesto exist, regardless of the lifespans of itsfounders, shareholders, managers, and directors.● Public corporations are political units. Publiccorporations include towns, villages, cities, andschool districts. Private corporations may beclassified as profit or nonprofit corporations.Private corporations are not government run.Profit corporations are organized for the purposeof making money, and they have capital stock.Profit corporations are found in nearly everymajor field of economic activity, including transportation,manufacturing, business, technology,entertainment, financial, and service fields.These corporations are regulated by the laws ofthe states in which they operate. In contrast, nonprofitcorporations are formed for educational,religious, charitable or social purposes, andmembership is acquired by agreement ratherthan by acquisition of stock. Many nonprofit●●●fraternal organizations are nonstock corporations.A corporation is deemed domestic in thestate in which it is incorporated and is consideredforeign in other states. An alien corporation isone that is incorporated in another country but isdoing business in this country.A corporation cannot come into existence byitself—people must take the necessary steps tobring it into legal existence. A promoter carriesout the incorporation process by taking the initialsteps to organize and finance a business. Thesesteps may include assembling investors, leasingoffice and warehouse space, purchasing suppliesand equipment, and hiring employees. To createa corporation, the promoters must first choose aunique name and file the name with the secretaryof state. Under most state statutes, the wordscorporation, incorporated, or company, or anabbreviation of one of the words, must appear aspart of the corporate name. Articles of incorporation,which describe a corporation’s organization,powers and authority, must also be filedwith the secretary of state. Paying the filing feecompletes the application process. After theapplication is approved by the secretary ofstate, the corporation receives a certificate ofincorporation.A corporation is funded via subscription. At thetime the corporation is being organized, thepromoters seek out people who are interested inentering into contracts to buy stock when thecorporation completes its organization and isauthorized by the state to sell stock to the public.A limited liability company combines the bestfeatures of a partnership and a corporation. Likea corporation, it offers limited liability to itsowners, and as do the partners in a partnership,the owners of an LLC escape double taxation.620 Unit 6: Starting a Business