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Corporations & Franchises Lesson 4
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Corporations & Franchises Lesson 4


Corporations & Franchises, Texas Tech High School Economy, Lesson 4

Corporations & Franchises, Texas Tech High School Economy, Lesson 4

Published in Business , Economy & Finance
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  • 2. We lovePROFITS!Sole Proprietors make all of it.
  • 4. CorporationsShare profits among thousands
  • 6. Business has grownWant to expandWant to be more visibleWant the latest equipmentCharge less than competitorsGain market share
  • 7. Don’twantMore PartnersBut need MO
  • 8. LOOK for WHAT?FINANCIALBACKERSUse their $$$ while you run the business
  • 9. That’s what acorporation is!Owned by manyBy law is treated as though it were a personCan own propertyCan pay taxesCan sue & be suedCan make contracts, etc.
  • 10. A separate & distinct existenceFrom stockholders who ownits STOCK= share of corporation’sownership, entitling buyer to part offuture profits & assets
  • 11. Table 13 BUSINESSORGANIZATIONS p.145Corporations = ___% of businesses+ ___% of total business revenue19.988.8Partnerships are __ % of businesses.7.1
  • 12. Major advantage ofcorporationsLIMITED LIABILITYIF corporation goes bankrupt or issued, only the business loses money &assets,NOT the stockholders.A MINUS – More taxes
  • 13. Pros & Cons of CORPORATIONS• Profits & Losses• Liability• Management• Taxes• PersonalSatisfaction• Financing Growth• Life of the BusinessTable 12 p.144
  • 14. Profits & LossesOwners OR _________StockholdersDO NOT have to invest timeTO MAKE MONEY
  • 15. LIABILITYis LIMITEDIF it goes bankrupt/is sued, normallycreditors CANNOT take stockholders’personal property to pay debts
  • 16. MANAGE+Responsibility is divided among manyDecisions made by trained peopleHandles big, complex operationsCarry on different business activities
  • 17. MANAGEMENTDisadvantagesSlow decisionmakingInterests differManagement vs. Stockholders(= return on investment)
  • 18. TAXESCorporate profits are taxed by:1. the federal2. some state3. some local governments.
  • 19. SATISFAC+ Owning part of corporation- Little/No say in management
  • 20. FINANCINGGROWTHCan use resources of investorsCan issue stock to raise capital
  • 21. LIFE of theBUSINESSCan go on forever IF PROFITABLE
  • 22. 3 Things FoundersMUST DORegister with state (of headquarters)Sell StockElect a Board of Directors
  • 23. REGISTERING COREvery state has laws, most are similarMust file ARTICLES of INCORPORATIONDOCUMENT with info aboutcorporation. Filed with state.
  • 24. State grants a CORPORATIF articles of incorporationconform with state lawsCORPORATECHARTER
  • 25. SELL STOCKSRaise funds for expansionSell COMMON or PREFERED STOCK1.Partial ownership2. % of future profits (after preferred stockholders are paid)3. Voting rights – annual stockholder meeting4. NO guarantee of dividendCOMMONSTOCK
  • 26. PREFERREDSTOCK• Partial ownership• CANNOT vote• GUARANTEEDAnnual Dividend• IF corporationfolds, holders have1st claim onmoney aftercreditors are paid
  • 27. It getsBIG!Stock may be traded in OTC market= Brokers buy & sell sharesContinues growth–may be sold on stock exchange
  • 28. Naming the BOARD oSTOCKHOLDERS elect board according tocorporate BYLAWS at annual meetingRules of how stock is sold & dividends paidwith list of company officers’ duties.(Written after corporate charter is granted.
  • 29. The BOARD supervisDOESN’T run daily businessHires officers-President, vice-president etc.Figure 36 page 146WHO reports to manufacturing V.P.?
  • 30. French Fries?FRANCHISESHotels, gas stations, fast food chains• Pay a fee + % of revenue• Gets help to set up business,training, standards of businessoperationsFranchisee uses company’s name & sellsits products
  • 31. REVIEWTable 14 p. 147 PROS & CONS Business Typesandexamples
  • 32. SOLEPROPRIETORSHIPEXAMPLES:FOOD: Subway, McDonalds, 7-Eleven, Dunkin DonutsHOTELS: Days Inn, Super 8PET CARE, HEALTH & FITNESS, ENVIRONMENTPROS:CONS:Easy to set up & dissolveSole decisionmakerProfit taxed onceUnlimited liabilityLimited fundraising forexpansionEnds - retirement/death
  • 33. PARTNERSHIPSExamples:Law Offices, Medical Practices, Ad AgenciesPROSPROS:CONS:CONS:SpecializeProfit taxed onceUnlimited liabilityDecisionmaking + complex
  • 34. EXAMPLES:Microsoft, Petrobras, Nestle, VW, CarrefourPROS:Owners/stockholders-limited liabilityContinues if owners sell shares/dieAble to raise large amounts of $$$CONS:Double taxationComplicated to set up
  • 36. UPCOMINCompetition & MonopoliesChapter 9