Corporation: Forms and Ways of Expansion

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A corporation refers to a large business or multiple companies connected as an individual entity in terms of legality and board of directors. With regard to corporation types, there are several aspects that categorize these legal entities. The first element is profit. There are two types of corporations with reference to profit: for-profit and nonprofit. For-profit corporations make money for the shareholders, while non-profit ones are meant to create profit for a specific cause. A difference between the two is the fact that for-profit companies have to pay taxes while non-profit ones are exempted from it.

Another aspect that differentiates corporations is the place where they conduct business. According to this criterion, there are domestic and foreign corporations. The domestic ones are formed in the country where they operate. The advantage is choosing a place with beneficial legislation that would have favorable outcomes for the business practices. On the other hand, foreign corporations are not limited by borders. These are the big companies that can conduct business somewhere different from where they were initially formed. This allows for a bigger market, more opportunities, and a higher chance of substantial profit.

Corporations also differ depending on the shareholders. The number of shares someone owns is irrelevant since one share is enough for a person to be called a shareholder. Closely held corporations are characterized by a small number of owners. These are usually small companies that do not publicly trade. There are also publically traded companies, which are the ones with multiple shareholders and shares that are available for the public to purchase. Some examples would be Amazon, Apple, Microsoft, and Facebook.

Ways of Corporate Expansion

Expansion is the ultimate goal of every corporation that is focused on profit. Certain reforms maximise the potential of growth on many different levels (Singh et al., 2018). There are many ways for a corporation to expand, but there are four detrimental ones. Those are purchasing assets, merger, consolidation, and purchase of stocks. Each aspect of the corporate expansion is closely tied to these elements that subsequently lead to a solid corporate base.

Purchasing assets refers to the transaction between one company that buys another company’s assets. The main advantage of this way of expansion is the possibility to choose the most favorable assets that have the most business potential. The merger is closely tied to the first way of expansion. However, in this case, a company is entirely absorbed by the corporation. A cash merger is when the shareholder trades the shares and receives cash in return, and a non-cash merger is the act of trading shares of the disappearing company in exchange for shares in the company that absorbs it. Consolidation and merger are similar in terms of the process but different in terms of results. In this case, the two companies that are participating in the transaction form a bigger corporation, and none of the initial companies disappear. Purchasing stock is another way of corporate expansion. This refers to a company buying the stock that would be enough to gain control over the business. Instead of purchasing all the shares, it means obtaining enough of them to have an influence on the company.

Corporations differ on many different levels, including profit (for-profit or non-profit), place of activity (domestic or foreign), and the number of shareholders (closely held or publically traded). Furthermore, corporate expansion is the crucial goal of every shareholder. The four main ways of expansion include purchasing assets, merger, consolidation, and purchasing stock. They refer to buying another company’s assets, absorbing it, combining with it, or purchasing enough stock that would be enough to control it.

Reference

Singh, D., Pattnaik, C., Gaur, A. S., & Ketencioglu, E. (2018). Corporate expansion during pro-market reforms in emerging markets: The contingent value of group affiliation and diversification.Journal of Business Research, 82, 220-229.

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Corporation: Forms and Ways of Expansion

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