MGMT 120 - Chapter 4

foreign corporation

a corporation doing business in other states

domestic corporation

a corporation doing business in the state in which it is chartered

corporation

a legal entity created by the state, with assets and liabilities distinct from those of the owner of the corporation 1. corporation has many rights, duties, and powers of a person, including right to receive, own, and transfer property. Can enter into contracts with individuals or with other legal entities, and can sue and be sued in court 2. represent majority of sales and income in US 3. typically owned by many individuals who own shares of the business, aka stock. Thus, owners are called stockholders or shareholders

chartering

a procedure in which a corporation is created under the laws of the state in which it incorporates,

preferred stock

allows no voting rights but confers preference in the distribution of company profits - owners usually special class of owners because they have a claim to profits before other stockholders do

common stock

allows owner voting rights - don't get any preferential treatment with regards to dividends, but do get some say in operation of corporation by voting on board members and other important issues - preemptive right to purchase new shares of the common stock directly from the corporation

partnerships

an association of two or more persons who carry on as co-owners of a business for profit

sole proprietorship

businesses owned by one person

dividends

cash payments distributed when there are profits that are left after all the corporation's other obligations have been paid

vertical merger

companies operating at different but related levels of an industry merge

corporate raider

company or individual who wants to acquire or take over another company and first offers to bu some or all of its stock at a premium in a tender offer

disadvantages of corporations

corporation pays taxes on its income, and stockholders pay taxes on the dividend distributions they receive from the company... aka DOUBLE TAXATION

quasi-public corporations

corporations owned and operated by federal, state, or local government; provide a service to citizens rather than earn profits (ex: NASA, US Postal Service)

board of directors

elected by stockholders to oversee the general operations of corporation; set long-range objectives of corporation and sees the objectives are achieved on schedule

articles of partnership

legal documents that set forth the basic agreement between partners

shark repellent

management requires a large majority of stockholders to approve a takeover

partnership capital

money or assets each partner has contributed to the partnership

merger

occurs when two companies combine to form a new one

acquisition

one company purchases another, usually buying its stock

public corporation

one whose stock anyone may buy, sell, or trade

cooperative (co-op)

organization composed of individuals/ small businesses that have banded together to reap benefits of belonging to a larger organization

private corporation

owned only by one person or few people closely involved in its management - don't offer stock for sale to public - not required to publicly disclose financial info, but must pay taxes

general partnership

partners sharing completely the management of a business and the liability for its debts

joint venture

partnership established for a specific project or for a limited time; may be individuals or organizations, in the case of international joint ventures

initial public offering (IPO)

private corporation may "go public" through this; sells its stock so it can be traded in public markets

leveraged buyout (LBO)

purchase of a company by a group of investors with borrowed money, using the assets of the company to guarantee repayment of the loan

stock

shares of a business

articles of incorporation must be filed with...

the appropriate state office

quasi-taxable organization

the organization doesn't pay taxes; individual partner reports their share of the profits on their individual tax returns and are taxed at the ordinary income tax rate for individuals (partnerships apply here)

disadvantages of partnership

x limited partners have no voice in management and bear most of rick in business x subject to disagreements when goals and objectives of one partner changes x UNLIMITED LIABILITY x all partners responsible for business actions and decisions of all other partners x life of a partnership

disadvantages of sole proprietorship

x usually difficult for small role proprietorship to offer same wages, benefits, and advancement possibilities often found in large corporation

advantages of partnership

+ ease of organization + availability of capital and credit + can provide diverse skills because partners are able to specialize in their areas of expertise + can react quickly to changes in business environment + fewer regulatory controls over its activities than the public corporation

advantages of corporations (external sources of funds)

+ long term funds can be raised more easily by a public corporation than by partnerships or sole proprietorship

advantages of sole proprietorship

+ simple management structure and ability to make quick decisions + ease of cost of formation + advantage of secrecy as operating plans and financial records don't have to be disclosed to others + all profits belong to owner + owner has complete control over how business is run + greatest degree of freedom from government regulation + taxation

3 primary forms of business

1. sole proprietorship (far outnumber corporation, but net far fewer sales and less income) 2. partnership (least used form) 3. corporation (account for majority of all US sales and income, but represent small number of organizations in US)

poison pill

firm allows stockholders to buy more shares of a stock at lower prices than the current market value to head off a hostile take over

conglomerate merger

firms in unrelated industries merge

horizontal merger

firms that make and sell similar products merge

nonprofit corporations

focus on providing a service rather than earning a profit; not owned by government entity (ex: American Lung Association, American Red Cross, museums, private schools)

limited liability company (LLC)

form of business ownership that provides limited liability but is taxed like a partnership; major reason to use LLC is to protect members' personal assets - also flexible, easy to run, and don't require members to hold meetings, keep minutes, or make resolutions

limited partnership

has at least one general partner who assumes the unlimited liability and at least one limited partner whose liability is limited to the amount of the investment in the business

incorporators

individuals who create the corporation