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

1. The CORPORATE WORLD &
FRANCHISES

2. We love
PROFITS!
Sole Proprietors make all of it.

3. PARTNERSHIPS
Share

4. Corporati
ons
Share profits among thousands

5. WHY a
CORPORATION ?

6. Business has grown
Want to expand
Want to be more visible
Want the latest equipment
Charge less than competitors
Gain market share

7. Don’t
wantMore Partners
But need MO

8. LOOK for WHAT?
FINANCIAL
BACKERS
Use their $$$ while you run the business

9. That’s what a
corporation is!
Owned by many
By law is treated as though it were a person
Can own property
Can pay taxes
Can sue & be sued
Can make contracts, etc.

10. A separate & distinct existence
From stockholders who own
its STOCK= share of corporation’s
ownership, entitling buyer to part of
future profits & assets

11. Table 13 BUSINESS
ORGANIZATIONS p.145Corporations = ___% of businesses
+ ___% of total business revenue
19.9
88.8
Partnerships are __ % of businesses.7.1

12. Major advantage of
corporationsLIMITED LIABILITY
IF corporation goes bankrupt or is
sued, only the business loses money &
assets,
NOT the stockholders.
A MINUS – More taxes

13. Pros & Cons of CORPORATIONS
• Profits & Losses
• Liability
• Management
• Taxes
• Personal
Satisfaction
• Financing Growth
• Life of the Business
Table 12 p.
144

14. Profits & Losses
Owners OR _________Stockholders
DO NOT have to invest time
TO MAKE MONEY

15. LIABILITYis LIMITED
IF it goes bankrupt/is sued, normally
creditors CANNOT take stockholders’
personal property to pay debts

16. MANAGE+
Responsibility is divided among many
Decisions made by trained people
Handles big, complex operations
Carry on different business activities

17. MANAGEMEN
T
Disadvantages
Slow decisionmaking
Interests differ
Management vs. Stockholders
(= return on investment)

18. TAXES
Corporate profits are taxed by:
1. the federal
2. some state
3. some local governments.

19. SATISFAC
+ Owning part of corporation
- Little/No say in management

20. FINANCING
GROWTH
Can use resources of investors
Can issue stock to raise capital

21. LIFE of the
BUSINESS
Can go on forever IF PROFITABLE

22. 3 Things Founders
MUST DO
Register with state (of headquarters)
Sell Stock
Elect a Board of Directors

23. REGISTERING COR
Every state has laws, most are similar
Must file ARTICLES of INCORPORATION
DOCUMENT with info about
corporation. Filed with state.

24. State grants a CORPORAT
IF articles of incorporation
conform with state laws
CORPORATE
CHARTER

25. SELL STOCKS
Raise funds for expansion
Sell COMMON or PREFERED STOCK
1.Partial ownership
2. % of future profits (after preferred stockholders are paid)
3. Voting rights – annual stockholder meeting
4. NO guarantee of dividend
COMMON
STOCK

26. PREFERRED
STOCK• Partial ownership
• CANNOT vote
• GUARANTEED
Annual Dividend
• IF corporation
folds, holders have
1st claim on
money after
creditors are paid

27. It gets
BIG!
Stock may be traded in OTC market
= Brokers buy & sell shares
Continues growth–may be sold on stock exchange

28. Naming the BOARD o
STOCKHOLDERS elect board according to
corporate BYLAWS at annual meeting
Rules of how stock is sold & dividends paid
with list of company officers’ duties.
(Written after corporate charter is granted.

29. The BOARD supervis
DOESN’T run daily business
Hires officers-President, vice-president etc.
Figure 36 page 146
WHO reports to manufacturing V.P.?

30. French Fries?FRANCH
ISESHotels, gas stations, fast food chains
• Pay a fee + % of revenue
• Gets help to set up business,
training, standards of business
operations
Franchisee uses company’s name & sells
its products

31. REVIEW
Table 14 p. 147 PROS & CONS Business Types
and
examples

32. SOLE
PROPRIETORSHIP
EXAMPLES:
FOOD: Subway, McDonald's, 7-Eleven, Dunkin' Donuts
HOTELS: Days Inn, Super 8
PET CARE, HEALTH & FITNESS, ENVIRONMENT
PROS:
CONS:
Easy to set up & dissolve
Sole decisionmaker
Profit taxed once
Unlimited liability
Limited fundraising for
expansion
Ends - retirement/death

33. PARTNERSHIPS
Examples:
Law Offices, Medical Practices, Ad Agencies
PROS
PROS:
CONS:
CONS:
Specialize
Profit taxed once
Unlimited liability
Decisionmaking + complex

34. EXAMPLES:Microsoft, Petrobras, Nestle, VW, Carrefour
PR
OS:
Owners/stockholders-limited liability
Continues if owners sell shares/die
Able to raise large amounts of $$$
CONS:Double taxation
Complicated to set up

35. The CORPORATE WORLD &
FRANCHISES
THE END of

36. UPCOMIN
Competition & Monopolies
Chapter 9