A corporation is typically owned and controlled by its members. In a joint-stock company, the members are known as shareholders and their share in the ownership, control, and profits of the corporation is determined by their portion of shares. Thus, a person who owns a quarter of the shares of a joint-stock company owns a quarter of the company, is entitled to a quarter of the profit or at least a quarter of the profit given to shareholders as dividends , and has a quarter of the votes that may be cast at general meetings.
Membership in this case depends on the corporation type. For instance, in a worker cooperative, people who work for the cooperative are members, while in a credit union, people who have credit union accounts are members. The day-to-day activities of a corporation are typically controlled by individuals appointed by the members.
In some cases, this will be a single individual, but more commonly, corporations are controlled by a committee or by committees. Broadly speaking, two kinds of committee structures exist. A single committee or board of directors is the method favored in most common law countries.
The board of directors is composed of both executive and non-executive directors. A two-tiered committee structure with a supervisory board and a managing board is common in civil law countries. Under this model, the executive directors sit on one committee while the non-executive directors sit on the other.
He owns many companies through his investment firm Berkshire Hathaway. The Marketing department is considered by some business professionals as the most important entity in the corporate structure. Without this department, sales or new customers cannot be realized. The Finance department is also vitally important, as it is responsible for acquiring capital used in running an organization.
Other segments of corporate structure may consist of the Accounting department, HumanResources department, IT department, and the Operational aspect of the particular company. These main six corporate departments represent the major managing resources within a publicly traded company; though there are often smaller departments either within the major segments or in autonomous form. Another way a corporate structure can be defined is by business divisions.
A division of a business is a distinct part of the firm, however the company is legally responsible for all of the obligations and debts of each division. In a large organization, various parts of the business may be run by different subsidiaries, and a business division may include one or many subsidiaries.
Each subsidiary is a separate legal entity owned by the primary business or by another subsidiary in the hierarchy. Hewlett Packard HP is a good example of a corporate structure including multiple divisions. The divisions of HP — e. However, Compaq a part of HP since operates as a subsidiary, using the Compaq brand name.
Corporate Structure : Hewlett Packard is an example of a corporation with multiple divisions and subsidiaries. Another example is Google. Google Video is a division of Google, and is part of the same corporate entity. However, the YouTube video service is a subsidiary of Google because it remains operated as YouTube, LLC — a separate business entity even though it is owned by Google. As a result, their losses cannot exceed the amount which they contributed to the corporation as dues or payment for shares.
This enables corporations to socialize their costs. Socializing a cost is to spread it to society in general. Without limited liability, a creditor would probably not allow any share to be sold to a buyer at least as creditworthy as the seller. Limited liability reduces the amount that a shareholder can lose in a company so it allows corporations to raise large amounts of finance for their enterprises by combining funds from many stock owners.
This increases the attraction to potential shareholders and increases both the number of willing shareholders and the amount they are likely to invest. Shareholders receive ownership rights based on their percentage of ownership in corporate stock.
Shares are considered to be an apportioned ownership interest in the business. The value of one share of stock can range from less than one percent to percent. When a corporation is initially incorporated, the original owners are routinely the first shareholders.
In smaller businesses, the initial owners remain the sole shareholders throughout the life of the corporation. Employees, managers, and owners may all be stockholders in the company where they handle the daily operations of the business. Additionally, one individual may be a shareholder, director, and officer. Generally, this only occurs in small corporations. The general public or private investors will normally be the majority shareholders in a large corporation.
Each shareholder will usually receive a stock certificate indicating how many shares they own in total. One of the most important things a business owner should consider when starting a corporation is the number of stockholders who can hold ownership in the corporation. If you want to incorporate as a small business owner, take note of the different forms of corporations and decide which one best fits your business model.
Corporations enjoy continuity of existence, limited liability for owners, officers and directors, centralized management by a board of directors and the free transferability of ownership. Because the corporation operates as a legal entity, a court can hold the corporation liable for its obligations. The stockholders of a corporation generally do not hold personal liability for the obligations of the corporation; they risk only the money they used to purchase their stock.
A small business owner who wants to protect his personal assets would do well to incorporate his business, thereby risking only the money he invested in his business. Many investors can purchase the stock of one C corporation. Investors who become stockholders also can sell their stock without the permission of the other stockholders.
Once a stockholder sells his stock, the corporation continues to exist. This is an attractive option for a business owner who may want to bring in new investors at some time in the future. While being the owner of a C corporation has these advantages, it also has one big disadvantage: double taxation.
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