4.3. Corporation

A corporation is 1) an organization led by many people but treated by the law as though it were a person; 2) an organization or a group of organizations that work together as a single organization; 3) a legal entity with the right to enter into contracts; the right to own, buy and sell property; and the right to sell stock.

A corporation may be owned by a large number of investors who purchase shares of stock issued by the corporation. Each share of stock is a certificate of ownership that represents an equal share in the ownership of a corporation. Stockholders, or shareholders, are the owners of a corporation.

Shares of stock are often traded in stock markets, such as the New York, London and Tokyo stock exchanges, which are established specifically for this purpose. These markets facilitate the exchange of stock between buyers and sellers. Therefore, unlike other businesses, the ownership in many corporations changes frequently as stockholders buy or sell shares of stock. Major corporations, such as General Motors, Exxon, or Microsoft, have received billions of dollars from stockholders.

Having considered the three major forms of business organizations, you can see that some business is managed by a single individual, some business is managed by many people collectively, while some business is run in the form of joint stock companies. It should be mentioned that the right choice of the form of the business is very crucial because it determines the power, control, risk and responsibility of the owner as well as the division of profits and losses. The choice of the form of business organizations can often mean the difference between a successful business and one that fails.