Download Corporations, Mergers, and Multinationals

Corporations, Mergers, and
Multinationals
In this lesson, students will be able to
identify characteristics of corporations,
mergers, and multinationals.
Students will be able to identify and/or
define the following terms:
Corporation
Stocks
Dividends
Mergers
E. Napp
Unlike a sole proprietorship, a corporation
is a business owned by stockholders.
E. Napp
Corporation
• A corporation is a legal entity owned by
individual stockholders.
• A corporation is considered a separate
entity apart from its owners.
• As such, the corporation can be sued but
individual stockholders cannot be sued.
E. Napp
Each stockholder is a partial owner
of the corporation.
E. Napp
Stocks
• When a business is incorporated, stocks
are generally sold.
• By selling stocks, the corporation acquires
capital.
• By buying stocks, individuals become
partial owners of the corporation.
E. Napp
By becoming
a stockholder
or partial owner
of Burger King,
the investor
receives some
of the
corporation’s
profits.
E. Napp
Limited Liability
• However, it is important to remember that
a corporation is a separate entity apart
from its owners.
• Therefore, the stockholder has limited
liability.
• He can only lose his investment.
E. Napp
But don’t forget trade-offs. While
investors make dividends or their
share of the profits, corporations
experience double taxation.
E. Napp
Double Taxation
• Double taxation is one of the
disadvantages of incorporation.
• Double taxation means that after
corporations pay taxes on their profits,
individual stockholders pay taxes on their
dividends.
• Profits are taxed twice!
E. Napp
A multinational corporation (MNC) is
a corporation that operates in
different countries.
E. Napp
Raising Money
• Corporations raise money by selling
stocks or bonds.
• Remember the investment poem:
Stocks, you own
Bonds, you loan
• When a person buys stock, he becomes a
partial owner. When he buys bonds, he
loans money to the corporation and must
be repaid.
E. Napp
The sale of stocks and bonds allow
corporations to raise money.
E. Napp
A merger occurs when one business
acquires another business. The
government carefully monitors mergers.
E. Napp
Questions for Reflection:
• How does a person become a stockholder
and why would a person want to become a
stockholder?
• What are the advantages and
disadvantages of incorporation?
• How does a corporation become a
multinational corporation?
• Why does the government monitor
mergers?
E. Napp