4. Corporate Flashcards
(20 cards)
Companies cannot vote so to make their voice heard, they do:
Lobbying
Critical process innovations
Specialization and division of labor: increased productivity because workers focused on tasks.
Critical technical innovation of the Industrial Revolution
Steam engine, telegraph, electricity
Key advantage the corporate form provided over earlier business structures
Companies would operate beyond the lives of their founders
Legal Innovation
Gave cooperation the rights of people, privacy, and free speech, allows more individuals to enjoy the benefits of limited liability and perpetual existence
Limited liability
Owners not being personally responsible for company debt
LLCs
Transfer restrictions and owners pay self-employment tax which is less beneficial than capital gains tax for shareholders in C-Corp
Most large companies on the public stock market are:
C-corporation
Negative Enternality
Pollution, company saves money by not preventing pollutants, leading to health issues in surrounding community.
Permanent Capital
Refers to long term financial resources that corporation can rely on to fund operations and investments without set repayment date
Perpetual existence
Corporation keeps running despite change of leader
Positive Externalities
Job opportunities, community outreach, volunteering, internships
Reason most companies with publicly traded stock are C-Corps
They have more tax benefits for shareholders, no limit to the number of shareholders, no limit to citizenship.
S Corps are limited to how many shareholders who must be who which makes them unlikely to be on public markets
100 shareholders; US citizens
Significant change made to the Dutch East India Company (VOC) in 1613 to ensure continuity of operations
Its partnerships lasted for 21 years
Technical innovations enable:
Large scale processes, expanded reach to more people and investors
The main reason US businesses grew faster
The US has one set of rules and one currency while different countries had different border controls, currencies and regulations.
The primary problem with the partnership model of funding voyages before 1602
Profits had to be distributed after each voyage
The primary role of corporations in the expansion of large businesses.
Provided a legal structure for combining resources and limiting individual risk
Three critical innovations
Process, technical, and legal
