Economics Notes

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CORPORATIONS

Companies that have decided to sell part of their ownerships to the public by selling stock.

HOW DO YOU BECOME OWNER? BUY STOCKS OF A COMPANY

WHY DO YOU COMPANIES BECOME CORPORATIONS? So they can raise money by selling stock

How do you become a corporation?

·       Register with the state government.

·       The state will investigate them

·       Now they can sell stock

CORPORATIONS

ADVANTAGES	DISADVANTAGES
No time spent running the company	Corporate charters expense
Limited liability (the stock holder looses the value of the stock only)	Close government monitoring (watching)
Many areas of expertise	Slower decisions making
Can get out anytime by selling your stock	Needs of stock holders are not looked at
Can issue more stock to raise more money	Profits from stocks taxed heavily
Death of stockholders have no effect Longevity of corporation (if you die it does not effect exxon)

STOCK: IF you buy a stock you are part owner of the company.

TWO TYPES OF STOCKS

·       COMMON STOCK

·       PREFERRED STOCK

MAKING MONEY FROM STOCK

·       DIVIDENDS

Check every three months with profit from the stocks. Every three months if the company made profit from the stocks then you will get a check.

·       SPECULATION

Buying stock expecting to

·       CAPITAL GAINS

            Profit from Selling Stocks

·       CAPITAL LOSS

            Loss from selling stocks

If you loose money you can deduct it from your taxes

BONDS (Loaning money to corporation)

·       If you buy a bond, you are not part owner, you are a creditor

o   That means that the company owes you money plus interest.

·       Maturity Date: The length of the bond (loan)

TYPES OF BONDS

o   CORPORATE BONDS

§  A bond from a company (corporation)

o   MUNICIPAL BONDS

§  A bond from your local government