Corporations, concerns, conglomerates. What it is?
What is a corporation?
A corporation is a legal entity that is created to carry out commercial activities. The corporation has its owners, who are called shareholders. They, in turn, invest personal money in the company and receive a share of its profits depending on the number of shares they have purchased.
A corporation has its own property and rights, separate from its shareholders, and it can enter into contracts, sign documents, seek loans, and have its own bank account. One of the main advantages of a corporation is that the shareholders are not personally liable for the corporation’s debts or actions. This means that if the corporation runs into financial problems, then the shareholders will not be required to cover these costs with their personal funds. Corporations are divided into public and private. Public ones have shares that are traded on the stock exchange, while private ones have a limited number of shareholders and do not trade their shares on the stock exchange. In addition, there are several types of corporations, including “C” corporations, which are subject to double taxation, “S” corporations avoid double taxation and are instead taxed at the level of individual shareholders’ tax returns.
This is a general definition of a corporation and its main characteristics.
What do you need to know in order to create a corporation?
Corporations can have different organizational structures. For example, they may have a board of directors that manages the company and makes strategic decisions, an executive director manages the day-to-day operations of the company. Depending on the legal requirements in a particular country, the formation of a corporation may require certain procedures, such as registration of constituent documents, obtaining licenses and permits to operate, and issuing shares. In addition, corporations can have a variety of goals and missions, from profitable organizations that seek to maximize profits for their shareholders, to non-profit organizations that work for the good of society and do not have a profit goal. In some cases, corporations can also be held liable for violations of the law or other wrongful acts, and, depending on the jurisdiction, may be fined or have other legal consequences. In addition, corporations can have several types of shares. For example, some shares may have a priority right to receive dividends, vote at shareholder meetings, or a priority right to sell shares over other shareholders.
Why do corporations merge?
Organizations of this type can be combined into conglomerates or concerns, which consist of several related companies that have common ownership and control. Another important aspect of corporations is their corporate culture and social responsibility. They may have their own values, missions and goals that may influence their business strategy and decisions.
Specifically:
- Increasing your social responsibility (CSR). It is a topic that is gaining more and more attention nowadays and relates to how a company interacts with society and the environment, including taking into account the interests of various stakeholders such as customers, employees, suppliers, shareholders, government bodies and society as a whole;
- Corporations, conglomerates, concerns may have different advantages and limitations compared to other forms of business, such as an individual entrepreneur, a private enterprise, or a limited liability company. For example, corporations have a greater degree of legal protection and the ability to attract large investments, but also usually have a more complex organizational structure and more rules and regulations that they must comply with;
- Corporations, conglomerates, and concerns can also raise funding through a variety of means, including the sale of bonds and the issuance of shares. Bonds are debt instruments that a company issues and sells to investors in exchange for borrowed funds. Shares represent a share in the ownership of the company and give its owners the right to receive dividends, participate in voting at shareholders’ meetings and profit from the increase in the value of shares.
Another important aspect of the association of corporations is to increase the efficiency of their management. Corporations, conglomerates, concerns usually have a board of directors, which consists of people chosen by shareholders who are responsible for managing the corporation and making strategic decisions. Such associations create a common executive body, which, due to the experience of the partner company, can much better manage the daily operations of the entire structure. They can raise finance more effectively by pooling the internal resources of all participants, including the sale of bonds and the issuance of new shares. Bonds are debt instruments that a company issues and sells to investors in exchange for borrowed funds. Shares represent a share in the ownership of the company and give its owners the right to receive dividends, participate in voting at shareholders’ meetings and profit from the increase in the value of shares. With regard to the taxation of conglomerates and corporations, they are usually subject to income tax, which is calculated on the basis of the company’s net income after deducting expenses and tax benefits. This can be both an advantage and a disadvantage of corporations, depending on the specific circumstances, but more on the place of incorporation of the parent company.
How are corporations classified?
Corporations can be classified according to many parameters, including their size, industry, country of incorporation. They are an important part of the global economy, playing a leading role in job creation, innovation and global economic growth.
Corporations can be classified according to the country in which they are registered, and this parameter is one of the main classification criteria.
Specifically:
- Local: registered and operating in only one country;
- International: registered in one country, but having branches or subsidiaries in different countries;
- Multinational: registered in one country, but with subsidiaries in several countries, engaged in international trade and investment;
- Transnational: registered in one country, but having subsidiaries in different countries, engaged in international trade and investment, while they may not be tied to a specific country, they are aimed at maximizing profits in different parts of the world;
- Global: registered in one country but present in most countries of the world, covering all major markets and regions.