Corporations & Cooperatives

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Corporations & Cooperatives

A corporation is a form of business ownership that is a separate legal entity. Owners of a corporation have limited liability. Corporations can be public (traded on a stock exchange) or private. Public corporations are owned by shareholders.


Forms of Business Ownership Corporations & Cooperatives

Corporation:* owned by 1 or more shareholders* board of directors & management make decisions (influenced by shareholders who elect board of directors)* financed by shareholders* big businesses are always corporations

* limited liability - shareholders can only lose the money they invest* easier to raise money by selling shares* continuity of ownership - shares can easily be sold if an owner dies or wants to sell

Advantages: Corporation

* costly and complicated to set up* financial information must be made public* value of the company shares changes (because of trading on the stock exchange)* have to please shareholders* greater public scrutiny and profile

Disadvantages: Corporation

* limited liability & continuity of ownership* democratic one member, one vote system* control is kept in the hands of those who use the business

Advantages: Cooperative

* democratic systems does not encourage owners to invest additional money (since they still have only one vote)* may deter new investors as well, if they want control proportionate to their investment

Cooperative:* owned by 1 or more members* members make decisions * financed by members* traditionally, agriculture and credit unions have formed as cooperatives

A cooperative is a form of business ownership where the business is owned by its members. Each member has a single vote on the decisions of the cooperative, which leads to more democracy than a corporation.


Disadvantages: Cooperative

Limited liability means that if a company goes bankrupt, shareholders can ONLY lose the amount of money they have invested. Creditors cannot claim personal assets of shareholders (e.g., houses, cars) to pay the debts of the business.

When a business is 'incorporated', the business is a separate legal entity. The business can enter into contracts, take on debt, conduct business (and be sued) separate from the owner's of the business. Incorporated businesses have limited liability.



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