Chapter # 04

The Modern
Corporation
Prepared by:
Ms. Ghazala Shamim

Corporation
The

most common form of business

organization, and which is chartered by a
state and given many legal, rights as an
entity separate from its owners.

It is a legal form of business created by

government.

Corporate Charter
A document, filed with a country state by a

corporations founders, describing the

purpose, place of business, and details of
a corporation.
It is issued by government.
It is prescribed by the law.

Shareholders or
Stockholders
Anindividual, group, ororganizationthat owns one

or moresharesin acompany, and in whose name

the sharecertificateis issued.
It islegalfor a company to have only one
shareholder.
It is also called stockholder.
Stockholders and shareholders are those who have a

shares in the company.

They are not participated in the management of the
organization.

Stock certificate
Legaldocumentissued

asproofofownershipin a firm. In the

modernstock markets, the paper share
is now being replaced by the electronic
share.
It is also called share certificate.
Legal evidence of ownership of shares.

Stakeholders
Stakeholderscan affect or be affected by

theorganization'sactions,objectivesandpolic
ies.
examples ofstakeholders are creditors,
directors, employees, government, owners
(shareholders), suppliers, unions and the
community from which the business draws it
resources.
Share holders are also included in the
stockholders.

Types of stakeholders
Internal stakeholder
o Individuals who reside inside the company as board
members, executives, managers, employees, and trade
unions, and who benefit directly from their contributions to
the growth of the company.
External stakeholder
o Individuals andorganizations that are affected by the

financial well-being of a company, who are not directly a

part of thatt company.
o External stakeholders of a business may include

shareholders, customers, suppliers, political connections

and other businesses in the same industries.

How to incorporate
Incorporation is tobringsomething in

toformpart of a main group.

To form a registered company.
The people who form a corporation is called
incorporator.

Certificate of
incorporation
Registered firm's 'birthcertificate' showing

itslegal nameand date ofincorporation.

It is also called certificate ofregistration.
It is an application to incorporate that must be
filled with the secretary of state.
Charter describe the corporations purpose
and its intended business.

Information for charter

Company name, stock holder name and address.
Location of main office.
Purpose for which the corporation is being formal.
Length of the life of business.
Amount and kind of stock was authorization to issue.
Name, address and powers of the original board of

director.
Dates and times of shareholders and directors
meetings.
Name of initial shareholder.
Procedure of original article of incorporation.

Types of corporation
Domestic corporation
Foreign corporation
Alien corporation
Open corporation
Close corporation

Domestic
Corporation
The term applied to a corporation in the state,
where it is incorporated.

Foreign
Corporation
The term applied to a united states
corporation in states other than the one in
which it is incorporated.

Alien Corporation
A firm corporate in a country other than the
one in which it is incorporated.

Open Corporation
A corporation whose stock can be purchased
by anyone who can afford the price.

Close Corporation
A corporation whose stock cannot be
purchased by the general public, it is usually
owned by a few individuals.

Organized corporation
By laws
Which are internal rules that govern the general
operation of a corporation.

The owner of a corporation are the stockholders

but they do not run the business.

They give the authority to develop the
companys policies to the board of directors.
Board members select the companys officers
(president, treasurer and secretary).
Corporations officers are responsible for
carrying out its day to day activities.

Cont
If the firm is large. It will employee and

supervise specialize managers in the relevant

field.
Stockholders are more interested in the
earnings or growth potential of their
investment.
in large corporation, where stockholders are
scattered and unable to contact each other
conveniently.

Advantages of
corporation
Unlimited liability
ease of expansion
Transferring ownership
Relatively long life
Incorporation

Disadvantages of
corporation
Expensive and complicated
Double taxation
Government restriction and reporting
Lack of personal identification