Corporate governance

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Not to be confused with a corporate state, a corporative government rather than the government of a corporation Corporate governance is the set of processes, customs, policies, laws, and institutions affecting the way a corporation (or company) is directed, administered or controlled. Corporategovernance also includes the relationships among the many stakeholders involved and the goals for which the corporation is governed. The principal stakeholders are the shareholders, the board of directors, employees, customers, creditors, suppliers, and the community at large. Corporate governance is a multi-faceted subject.

An important theme of corporate governance is to ensure the accountability of certain

individuals in an organization through mechanisms that try to reduce or eliminate the principal-agent problem. A related but separate thread of discussions focuses on the impact of a corporate governance system ineconomic efficiency, with a strong emphasis on shareholders' welfare. There are yet other aspects to the corporate governance subject, such as the stakeholder view and the corporate governance models around the world (see section 9 below). There has been renewed interest in the corporate governance practices of modern corporations since 2001, particularly due to the high-profile collapses of a number of large U.S. firms such as Enron Corporation and MCI Inc. (formerly WorldCom). In 2002, the U.S. federal government passed the Sarbanes-Oxley Act, intending to restore public confidence in corporate governance.

1 Definition 2 Legal environment 3 History - United States

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3.1 Impact of Corporate Governance 3.2 Role of Institutional Investors

4 Parties to corporate governance 5 Principles 6 Mechanisms and controls

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6.1 Internal corporate governance controls 6.2 External corporate governance controls

7 Systemic problems of corporate governance 8 Role of the accountant 9 Regulation

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9.1 Rules versus principles 9.2 Enforcement 9.3 Action Beyond Obligation


9.4 Proposals

10 Corporate governance models around the world


10.1 Anglo-American Model

11 Codes and guidelines 12 Ownership structures 13 Corporate governance and firm performance

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13.1 Board composition 13.2 Remuneration/Compensation

14 See also 15 References 16 Further reading 17 External links


This section relies largely or entirely upon a single source. Please help improve this article by introducing appropriate citationsto additional sources. (July 2010)

In A Board Culture of Corporate Governance, business author Gabrielle O'Donovan defines corporate governance as 'an internal system encompassing policies, processes and people, which serves the needs of shareholders and other stakeholders, by directing and controlling management activities with good business savvy, objectivity, accountability and integrity. Sound corporate governance is reliant on external marketplace commitment and legislation, plus a healthy board culture which safeguards policies and processes. O'Donovan goes on to say that 'the perceived quality of a company's corporate governance can influence its share price as well as the cost of raising capital. Quality is determined by the financial markets, legislation and other external market forces plus how policies and processes are implemented and how people are led. External forces are, to a large extent, outside the circle of control of any board. The internal environment is quite a different matter, and offers companies the opportunity to differentiate from competitors through their board culture. To date, too much of corporate governance debate has centred on legislative policy, to deter fraudulent activities and transparency policy which misleads executives to treat the symptoms and not the cause.'

It is a system of structuring, operating and controlling a company with a view to achieve long term strategic goals to satisfy shareholders, creditors, employees, customers and suppliers, and complying with the legal and regulatory requirements, apart from meeting environmental and local community needs. Report of SEBI committee (India) on Corporate Governance defines corporate governance as the acceptance by management of the inalienable rights of shareholders as the true owners of the corporation and of their own role as trustees on behalf of the shareholders. It is about commitment to values, about ethical business conduct and about making a distinction between personal & corporate funds in the management of a company.´ The definition is drawn from the Gandhian principle of trusteeship and the Directive Principles of the Indian

Constitution. Corporate Governance is viewed as business ethics and a moral duty. See also Corporate Social Entrepreneurship regarding employees who are driven by their sense of integrity (moral conscience) and duty to society. This notion stems from traditional philosophical ideas of virtue (or self governance)

and represents a "bottom-up" approach to corporate governance (agency) which supports the more

obvious "top-down" (systems and processes, i.e. structural) perspective. [edit]Legal


In the United States, corporations are governed under common law, the Model Business Corporation Act, and Delaware law since Delaware, as of 2004, was the domicile for the majority of publicly-traded corporations. charter and, less authoritatively, the corporate bylaws.
[4] [4]

Individual rules for corporations are based upon the corporate

In the United States, shareholders cannot initiate changes in the corporate charter

although they can initiate changes to the corporate bylaws.

In the UK, however, the analogous corporate constitutional documents (the

memorandum and articles of association) can be modified by a supermajority (75%) of shareholders.

Shareholders can initiate 'precatory

proposals' on various initiatives, but the results are nonbinding. Precatory proposals which have received majority support from shareholders, even for several consecutive years, have historically been rejected by the board of directors. [edit]History

- United States

In the 19th century, state corporation laws enhanced the rights of corporate boards to govern without unanimous consent of shareholders in exchange for statutory benefits like appraisal rights, to make corporate governance more efficient. Since that time, and because most large publicly traded corporations in the US are incorporated under corporate administration friendly Delaware law, and because the US's wealth has been increasingly securitized into various corporate entities and institutions, the rights of individual owners and shareholders have become increasingly derivative and dissipated. The concerns of shareholders over administration pay and stock losses periodically has led to more frequent calls for corporate governance reforms. In the 20th century in the immediate aftermath of the Wall Street Crash of 1929 legal scholars such as Adolf Augustus Berle, Edwin Dodd, and Gardiner C. Means pondered on the changing role of the modern corporation in society. Berle and Means' monograph "The Modern Corporation and Private Property" (1932, Macmillan) continues to have a profound influence on the conception of corporate governance in scholarly debates today. From the Chicago school of economics, Ronald Coase's "The Nature of the Firm" (1937) introduced the notion of transaction costs into the understanding of why firms are founded and how they continue to behave. Fifty years later, Eugene Fama and Michael Jensen's "The Separation of Ownership and Control" (1983, Journal of Law and Economics) firmly establishedagency theory as a way of understanding corporate governance: the firm is seen as a series of contracts. Agency theory's dominance was highlighted in a 1989 article by Kathleen Eisenhardt ("Agency theory: an assessement and review", Academy of Management Review). US expansion after World War II through the emergence of multinational corporations saw the establishment of the managerial class. Accordingly, the following Harvard Business Schoolmanagement professors published influential monographs studying their prominence: Myles Mace (entrepreneurship), Alfred D. Chandler, Jr. (business history), Jay Lorsch (organizational behavior) and Elizabeth MacIver (organizational behavior). According to Lorsch and MacIver "many large corporations have dominant control over business affairs without sufficient accountability or monitoring by their board of directors."

markets have become largely institutionalized: buyers and sellers are largely institutions (e. worldwide. averaged over 80% of NYSE trades in some months of 2007. Over the past three decades.who often had a vested. Global Crossing. the majority of investment now is described as "institutional investment" even though the vast majority of the funds are for the benefit of individual investors. and other financial institutions). The lack of corporate governance mechanisms in these countries highlighted the weaknesses of the institutions in their economies. Indonesia.g. because of so-called 'iceberg' orders. led to increased shareholder and governmental interest in corporate governance. exchange-traded funds. and around the globe. other investor groups. in part. corporate governance has been the subject of significant debate in the U. such as Adelphia Communications. hedge funds.Arthur Andersen. [edit]Role [6] of Institutional Investors Many years ago. personal and emotional interest in the corporations whose shares they owned.S. Kodak. Note that this process occurred simultaneously with the direct growth of individuals investingindirectly in the market (for example individuals have twice as much money in mutual funds as they do in bank accounts). not infrequently back dated). pension funds.g. banks. the hallmark of institutional trading. However this growth occurred primarily by way of individuals turning over their funds to 'professionals' to manage. insurance companies. South Korea. The California Public Employees' Retirement System (CalPERS) led a wave of institutional shareholder activism (something only very rarely seen before). The rise of the institutional investor has brought with it some increase of professional diligence which has tended to improve regulation of the stock market (but not necessarily in the interest of the small investor or even of the naïve institutions.[3] [edit]Impact of Corporate Governance The positive effect of corporate governance on different stakeholders ultimately is a strengthened economy. and hence good corporate governance is a tool for socio-economic development.: IBM.S. of which there are many). AOL.Since the late 1970¶s. as well as lesser corporate debacles. In the early 2000s. corporate directors¶ duties have expanded greatly beyond their traditional legal responsibility of duty of loyalty to the corporation and its shareowners. Program trading. wealth.. buyers and sellers of corporation stocks were individual investors. Over time. [5] In the first half of the 1990s. brokers. the East Asian Financial Crisis saw the economies of Thailand.. as a way of ensuring that corporate value would not be destroyed by the now traditionally cozy relationships between the CEO and the board of directors (e. received considerable press attention due to the wave of CEO dismissals (e. therefore. Bold.) . Tyco. the issue of corporate governance in the U. these statistics do not reveal the full extent of the practice. Malaysia and The Philippines severely affected by the exit of foreign capital after property assets collapsed. [4] (Moreover. In 1997. by the needs and desires of shareowners to exercise their rights of corporate ownership and to increase the value of their shares and. such as wealthy businessmen or families. such as in mutual funds. broad efforts to reform corporate governance have been driven. This is reflected in the passage of the Sarbanes-Oxley Act of 2002. Honeywell) by their boards. See Quantity and display instructions under last reference. mutual funds. the massive bankruptcies (and criminal malfeasance) of Enron and Worldcom. In this way.g. by the unrestrained issuance of stock options.

these investors have even less interest in a particular company's governance.Unfortunately. "BW identified five key ingredients that contribute to superior performance. the majority of the shares in the Japanese market are held by financial companies and industrial corporations (there is a large and deliberate amount of cross-holding among Japanese keiretsu corporations and within S. But. State Street Corp. exchange-traded funds (ETFs)." by Alan Murray. such as officers of the corporation or business colleagues. this superior performance amounts to 8% per year. they will simply sell out their interest. is blood lines. "Look beyond Six Sigma and the latest technology fad. the sale of derivatives (e." [6] In that last study. therefore. the largest pools of invested money (such as the mutual fund 'Vanguard 500'. there has been a concurrent lapse in the oversight of large corporations. "Revolt in the Boardroom.1 A recent study by Credit Suisse found that companies in which "founding families retain a stake of more than 10% of the company's capital enjoyed a superior performance over their respective sectorial peers. "poison pill" measures. the interests of most investors are now increasingly rarely tied to the fortunes of individual corporations. which are now almost all owned by large institutions. if the owning institutions don't like what the President/CEO is doing and they feel that firing them will likely be costly (think "golden handshake") and/or time consuming. Occasionally. and the Board diligently kept an eye on thecompany and its principal executives (they usually hired and fired the President. The Board is now mostly chosen by the President/CEO." Since 1996. aka.g.) has soared. and may be made up primarily of their friends and associates. Since the (institutional) shareholders rarely object. who usually had an emotional as well as monetary investment in the company (think Ford). Nowadays. or the largest investment management firm for corporations. The Board of Directors of large corporations used to be chosen by the principal shareholders. Stock market index options [7]." See also. based on the idea that this strategy will largely eliminate individual company financial or other risk and. [edit]Parties to corporate governance . institutional investors support shareholder resolutions on such matters as executive pay andanti-takeover.) are designed simply to invest in a very large number of different companies with sufficient liquidity. the President/CEO generally takes the Chair of the Board position for his/herself (which makes it much more difficult for the institutional owners to "fire" him/her). both individual and professional stock investors around the world have emerged as a potential new kind of major (short term) force in the direct or indirect ownership of corporations and in the markets: the casual participant. Even as the purchase of individual shares in any one corporation by individual investors diminishes. whereas stock in the USA or the UK and Europe are much more broadly owned. One of the biggest strategic advantages a company can have. [BusinessWeek has found].[5] Forget the celebrity CEO. Finally. often still by large individual investors. Korean chaebol 'groups') [8]. So.. for example. or Chief Executive Officer² CEO). etc. but rarely. Since the marked rise in the use of Internet transactions from the 1990s. Not all are qualities unique to enterprises with retained family interests. But they do go far to explain why it helps to have someone at the helm² or active behind the scenes² who has more than a mere paycheck and the prospect of a cozy retirement at stake. the ownership of stocks in markets around the world varies.

known as a Corporate Secretary in the US and often referred to as a Chartered Secretary if qualified by the Institute of Chartered Secretaries and Administrators (ICSA). All parties to corporate governance have an interest. They can help shareholders exercise their rights by effectively communicating information that is understandable and accessible and encouraging shareholders to participate in general meetings. shareholders and Auditors). is a high ranking professional who is trained to uphold the highest standards of corporate governance. customers and the community at large. human. In particular. management. Directors. Other stakeholders who take part include suppliers. With the significant increase in equity holdings of investors. effective operations. the shareholder delegates decision rights to the manager to act in the principal's best interests. a system of corporate governance controls is implemented to assist in aligning the incentives of managers with those of shareholders. the Chief Executive Officer. Partly as a result of this separation between the two parties. performance orientation. If some parties are receiving more than their fair return then participants may choose to not continue participating leading to organizational collapse. compliance and administration. the board of directors. creditors. [edit]Principles Key elements of good corporate governance principles include honesty. This separation of ownership from control implies a loss of effective control by shareholders over managerial decisions. mutual respect. In corporations. The Company Secretary. trust and integrity. responsibility and accountability. A key factor is an individual's decision to participate in an organisation e. openness. develop directional policy. . and commitment to the organization. whether direct or indirect. Commonly accepted principles of corporate governance include:  Rights and equitable treatment of shareholders: Organizations should respect the rights of shareholders and help shareholders to exercise those rights. suppliers receive compensation for their goods or services.g. appoint. Of importance is how directors and management develop a model of governance that aligns the values of the corporate participants and then evaluate this model periodically for its effectiveness. employees. through providing financial capital and trust that they will receive a fair share of the organisational returns. It is their responsibility to endorse the organisation's strategy. Customers receive goods and services.Parties involved in corporate governance include the regulatory body (e. In return these individuals provide value in the form of natural.g. A board of directors often plays a key role in corporate governance. while shareholders receive capital return. there has been an opportunity for a reversal of the separation of ownership and control problems because ownership is not so diffuse. especially concerning actual or apparent conflicts of interest. workers and management receive salaries. in the effective performance of the organization. social and other forms of capital. senior executives should conduct themselves honestly and ethically. benefits and reputation. supervise and remunerate senior executives and to ensure accountability of the organisation to its owners and authorities. and disclosure in financial reports.

 Integrity and ethical behaviour: Ethical and responsible decision making is not only important for public relations.  Disclosure and transparency: Organizations should clarify and make publicly known the roles and responsibilities of board and management to provide shareholders with a level of accountability. many organizations establish Compliance and Ethics Programs to minimize the risk that the firm steps outside of ethical and legal boundaries. factual information." despite some feeble attempts from various quarters.written objectives. efficient and transparent administration and strive to meet certain well defined. Organizations should develop a code of conduct for their directors and executives that promotes ethical and responsible decision making. It is important to understand. Smale. It is something much broader. [7] . for it must include a fair. though. wrote: "The Board is responsible for the successful perpetuation of the corporation. and the commitment to run a transparent organization. but it is also a necessary element in risk management and avoiding lawsuits.these should be constantly evolving due to interplay of many factors and the roles played by the more progressive/responsible elements within the corporate sector.  Interests of other stakeholders: Organizations should recognize that they have legal and other obligations to all legitimate stakeholders. Perpetuation for its own sake may be counterproductive. Issues involving corporate governance principles include:         internal controls and internal auditors the independence of the entity's external auditors and the quality of their audits oversight and management of risk oversight of the preparation of the entity's financial statements review of the compensation arrangements for the chief executive officer and other senior executives the resources made available to directors in carrying out their duties the way in which individuals are nominated for positions on the board dividend policy Nevertheless "corporate governance. Corporate governance must go well beyond law. a former member of the General Motors board of directors. Because of this. the degree and extent to which the board of Director (BOD) exercise their trustee responsibilities (largely an ethical commitment). remains an ambiguous and often misunderstood phrase. For quite some time it was confined only to corporate management. They should also implement procedures to independently verify and safeguard the integrity of the company's financial reporting. Role and responsibilities of the board: The board needs a range of skills and understanding to be able to deal with various business issues and have the ability to review and challenge management performance. There are issues about the appropriate mix of executive and non-executive directors. Disclosure of material matters concerning the organization should be timely and balanced to ensure that all investors have access to clear." However it should be noted that a corporation should cease to exist if that is in the best interests of its stakeholders. That responsibility cannot be relegated to management. that reliance by a company on the integrity and ethics of individuals is bound to eventual failure. It needs to be of sufficient size and have an appropriate level of commitment to fulfill its responsibilities and duties. That is not so. quality and frequency of financial and managerial disclosure. John G. The quantity.

ex ante. that executive directors look beyond the financial criteria. to monitor managers' behaviour. management. safeguards invested capital. and compliance with laws and regulations. It could be argued. and other personnel to provide reasonable assurance of the entity achieving its objectives related to reliable financial reporting. however. require that the President be a different person from the Treasurer. discussed and avoided. audit committee. shareholders.  Remuneration: Performance-based remuneration is designed to relate some proportion of salary to individual performance. For example. fire and compensate top management. superannuation or other benefits. It may be in the form of cash or non-cash payments such as shares and share options. Examples include:      competition debt covenants demand for and assessment of performance information (especially financial statements) government regulations managerial labour market . are reactive in the sense that they provide no mechanism for preventing mistakes or opportunistic behaviour. Different board structures are optimal for different firms. Whilst nonexecutive directors are thought to be more independent. Internal auditors are personnel within an organization who test the design and implementation of the entity's internal control procedures and the reliability of its financial reporting  Balance of power: The simplest balance of power is very common. with its legal authority to hire. [edit]External corporate governance controls External corporate governance controls encompass the controls external stakeholders exercise over the organisation. [8]  Internal control procedures and internal auditors: Internal control procedures are policies implemented by an entity's board of directors. operating efficiency. Executive directors possess superior knowledge of the decision-making process and therefore evaluate top management on the basis of the quality of its decisions that lead to financial performance outcomes. an independent third party (the external auditor) attests the accuracy of information provided by management to investors. employees) outside the three groups are being met. One group may propose company-wide administrative changes. another group review and can veto the changes. therefore. and a third group check that the interests of people (customers. and can elicit myopic behaviour. the ability of the board to monitor the firm's executives is a function of its access to information. This application of separation of power is further developed in companies where separate divisions check and balance each other's actions. An ideal control system should regulate both motivation and ability. Such incentive schemes. Regular board meetings allow potential problems to be identified. [edit]Internal corporate governance controls Internal corporate governance controls monitor activities and then take corrective action to accomplish organisational goals. they may not always result in more effective corporate governance and may not increase performance. Examples include:  Monitoring by the board of directors: The board of directors.[edit]Mechanisms and controls Corporate governance mechanisms and controls are designed to reduce the inefficiencies that arise from moral hazard and adverse selection. Moreover.

and even the definition of the accounting entity. The directors of the company should be entitled to expect that management prepare the financial information in compliance with statutory and ethical obligations. especially to a small shareholder. or if the informed user is unable to exercise a monitoring role due to high costs (see Systemic problems of corporate governance above). Current accounting practice allows a degree of choice of method in determining the method of measurement. Accountants and auditors are the primary providers of information to capital market participants. more fundamentally. be corrected by the working of the external auditing process. This should. the partner in charge of auditing. This may result in a conflict of interest which places the integrity of financial reports in doubt due to client pressure to appease management. In discussions of accounting practices with Arthur Andersen. One area of concern is whether the auditing firm acts as both the independent auditor and management consultant to the firm they are auditing. The traditional answer to this problem is the efficient market hypothesis (in finance. Similar provisions are in place under clause 49 of SEBI Act in India. However. Changes enacted in the United States in the form of the Sarbanes-Oxley Act (in response to the Enron situation as noted below) prohibit accounting firms from providing both auditing and management consulting services. the third party was an entity in which Enron had a substantial economic stake. good financial reporting is not a sufficient condition for the effectiveness of corporate governance if users don't process it. Enron concealed huge losses by creating illusions that a third party was contractually obliged to pay the amount of any losses. The power of the corporate client to initiate and terminate management consulting services and. [edit]Regulation [citation needed] .  media pressure takeovers [edit]Systemic problems of corporate governance  Demand for information: In order to influence the directors. [edit]Role of the accountant [9] Financial reporting is a crucial element necessary for the corporate governance system to function effectively. criteria for recognition. which suggests that the small shareholder will free ride on the judgements of larger professional investors. the efficient market hypothesis (EMH) asserts that financial markets are efficient). ideally. the shareholders must combine with others to form a significant voting group which can pose a real threat of carrying resolutions or appointing directors at a general meeting. views inevitably led to the client prevailing.  Monitoring costs: A barrier to shareholders using good information is the cost of processing it. it can involve non-disclosure of information. and rely on auditors' competence.  Supply of accounting information: Financial accounts form a crucial link in enabling providers of finance to monitor directors. The exercise of this choice to improve apparent performance (popularly known as creative accounting) imposes extra information costs on users. The Enron collapse is an example of misleading financial reporting. However. Imperfections in the financial reporting process will cause imperfections in the effectiveness of corporate governance. to select and dismiss accounting firms contradicts the concept of an independent auditor. In the extreme.

Companies law Company · Business Company forms Sole proprietorship Partnership (General · Limited · LLP) Corporation Cooperative United States S corporation · C corporation LLC · LLLP · Series LLC Delaware corporation Nevada corporation Massachusetts business trust UK / Ireland / Commonwealth Limited company (by shares · by guarantee Public · Proprietary) Unlimited company Community interest company .

Moreover.this is harder to achieve if one is bound by a broader principle. demarcating a clear line between acceptable and unacceptable behaviour. · N. even if clear rules are followed. one can still find a way to circumvent their underlying purpose . They may be ill-equipped to deal with new types of transactions not covered by the code.V.K. . · Oy · S. · more Doctrines Corporate governance Limited liability · Ultra vires Business judgment rule Internal affairs doctrine De facto corporation and corporation by estoppel Piercing the corporate veil Rochdale Principles Related areas Contract · Civil procedure v‡d‡e [edit]Rules versus principles Rules are typically thought to be simpler to follow than principles. In practice rules can be more complex than principles. Rules also reduce discretion on the part of individual managers or auditors.European Union / EEA SE · SCE · SPE · EEIG Elsewhere AB · AG · ANS · A/S · AS · GmbH K.A.

greater enforcement is not always better. [11] [10] Another proposal is for the government to allow poorly-managed businesses to go bankrupt. [edit]Corporate [12] governance models around the world Although the US model of corporate governance is the most notorious. this is largely a theoretical. the enlightened board is aligned on the critically important issues facing the company. It allows the sector to determine what standards are acceptable or unacceptable. since after a filing. . Because enlightened directors strongly believe that it is their duty to involve themselves in an intellectual analysis of how the company should move forward into the future. risk. There are various integrated governance. for taken too far it can dampen valuable risk-taking. however. enlightened boards regard compliance with regulations as merely a baseline for board performance. This type of software is based on project management style methodologies such as the ABACUS methodology which attempts to unify the management of these areas. as well as smaller companies. risk and compliance solutions available to capture information in order to evaluate risk and to identify gaps in the organization¶s principles and processes. It also pre-empts over zealous legislations that might not be practical. Enlightened directors go far beyond merely meeting the requirements on a checklist. enlightened directors recognize that it is not their role to be involved in the day-to-day operations of the corporation. Overall. They lead by example. the heavy presence of banks in the equity of German firms [9].Principles on the other hand is a form of self regulation. what most distinguishes enlightened directors from traditional and standard directors is the passionate obligation they feel to engage in the day-to-day challenges and strategizing of the company. At the same time. most of the time. In practice. Nevertheless. there is a considerable variation in corporate governance models around the world. They do not need Sarbanes-Oxley to mandate that they protect values and ethics or monitor CEO performance. as opposed to a real. [edit]Action Beyond Obligation Enlightened boards regard their mission as helping management lead the company. Unlike standard boards that aim to comply with regulations. They both deter bad actors and level the competitive playing field. enlightened boards do not feel hampered by the rules and regulations of the Sarbanes-Oxley Act. [edit]Proposals The book Money for Nothing suggests importing from England the concept of term limits to prevent independent directors from becoming too close to management and demanding that directors invest a meaningful amount of their own money (not grants of stock or options that they receive free) to ensure that the directors' interests align with those of average investors. Unlike traditional boards. rather than treat them as separate entities. directors have to cover more of their own legal bills and are frequently sued by bankruptcy trustees as well as investors. complex companies. They are more likely to be supportive of the senior management team. Enlightened boards can be found in very large. [edit]Enforcement Enforcement can affect the overall credibility of a regulatory system. The intricated shareholding structures of keiretsus in Japan.

S. such as hiring his/her immediate subordinates. a corporation is governed by a board of directors. usually known as the chief executive officer. but needs to get board approval for certain major actions. by their stock exchange. Each model has its own distinct competitive advantage. which some [edit]Codes [14] see as a conflict of interest. customers. The board of directors is nominally selected by and responsible to the shareholders. companies quoted on the London and Toronto Stock Exchanges formally need not follow the recommendations of their respective national codes. In the United States. However. The coordinated model that one finds in Continental Europe and Japan also recognizes the interests of workers. if they are public. the main problem is the conflict of interest between widely-dispersed shareholders and powerful managers. These differ according to the variety of capitalism in which they are embedded. the main problem is that the voting ownership is tightly-held by families through pyramidal ownership and dual shares (voting and nonvoting). major capital expansions. individual shareholders are not offered a choice of board nominees among which to choose. raising money. In the United States. or associations (institutes) of directors and managers with the support of governments and international organizations. where not. corporations. The liberal model of corporate governance encourages radical innovation and cost competition.the chaebols in South Korea and many others are examples of arrangements which try to respond to the same corporate governance challenges as in the US. This can lead to "self-dealing". or corporate control. [edit]Anglo-American [13] Model There are many different models of corporate governance around the world. or other expensive projects. In Europe. they must disclose whether they follow the recommendations in those documents and. The CEO has broad power to manage the corporation on a daily basis. with board members beholden to the chief executive whose actions they are intended to oversee. companies are primarily regulated by the state in which they incorporate though they are also regulated by the federal government and. monitoring management's performance. members of the boards of directors are CEOs of other corporations. which has the power to choose an executive officer. where the controlling families favor subsidiaries for which they have higher cash flow rights. Perverse incentives have pervaded many corporate boards in the developed world. suppliers. recent approach to governance issues and what has happened in the UK. Such disclosure requirements exert a significant pressure on listed companies for compliance. but are merely asked to rubberstamp the nominees of the sitting board. managers. institutional investors. but the bylaws of many companies make it difficult for all but the largest shareholders to have any influence over the makeup of the board. Frequently. For example. although the codes linked to stock exchange listing requirements may have a coercive effect. normally. there are important differences between the U. As a rule. Other duties of the board may include policy setting. The liberal model that is common in Anglo-American countries tends to give priority to the interests of shareholders. and the community. whereas the coordinated model of corporate governance facilitates incremental innovation and quality competition. The highest number of companies are incorporated in Delaware. including more . acquiring another company. In the United States. they should provide explanations concerning divergent practices. compliance with these governance recommendations is not mandated by law. decision making. However. and guidelines Corporate governance principles and codes have been developed in different countries and issued from stock exchanges.

Norman Veasey. For example. or should they create governance guidelines that ascend to the level of best practice. Building on the work of the OECD. other international organisations. Most states' corporate law generally follow the American Bar Association's Model Business Corporation Act. standards. standards and frameworks relevant to the sustainability agenda. it still considers its provisions and several prominent Delaware justices.e. in other words. corporate managers and individual companies tend to be wholly voluntary. The GM Board Guidelines reflect the company¶s efforts to improve its own governance capacity. For example. The idea behind the concept of ownership structures is to be able to understand the . It is a tool frequently employed by policy-makers and researchers in their analyses of corporate governance within a country or business group. While Delaware does not follow the Act. do they merely try to supersede the legal threshold. ownership structures are identified by using some observable measures of ownership concentration (i.This document aims to provide general information.than half of the Fortune 500. One issue that has been raised since the Disney decision [15] in 2005 is the degree to which companies manage their governance responsibilities. Generally. the United NationsIntergovernmental Working Group of Experts on International Standards of Accounting and Reporting (ISAR) has produced voluntary Guidance on Good Practices in Corporate Governance Disclosure. particularly on accountability and reporting. however. the guidelines issued by associations of directors (see Section 3 above). This is due to Delaware's generally management-friendly corporate legal environment and the existence of a state court dedicated solely to business issues (Delaware Court of Chancery). The OECD remains a proponent of corporate governance principles throughout the world. [edit]Ownership structures Ownership structures refers to the various patterns in which shareholders seem to set up with respect to a certain group of firms. concentration ratios) and then making a sketch showing its visual representation. may have a wider multiplying effect prompting other companies to adopt similar documents and standards of best practice. This internationally agreed consists of more than fifty distinct disclosure items across five broad categories: [17] [16] benchmark      Auditing Board and management structure and process Corporate responsibility and compliance Financial transparency and information disclosure Ownership structure and exercise of control rights The World Business Council for Sustainable Development WBCSD has done work on corporate governance. a "snap-shot" of the landscape and a perspective from a thinktank/professional association on a few key codes. and frameworks. This was revised in 2004.And ownership can be changed by the stakeholders of the company. and in 2004 created an Issue Management Tool: Strategic challenges for business in the use of corporate responsibility codes. participate on ABA committees. private sector associations and more than 20 national corporate governance codes. including former Delaware Supreme Court Chief Justice E. One of the most influential guidelines has been the 1999 OECD Principles of Corporate Governance. Such documents.

Other studies have linked broad perceptions of the quality of companies to superior share price performance. Others have found a negative relationship between the proportion of external directors and profitability. found that those "most admired" had an average return of 125%. In a separate study Business Weekenlisted institutional investors and 'experts' to assist in differentiating between boards with good and bad governance and found that companies with the highest rankings had the highest financial returns. They defined a well-governed company as one that had mostly out-side directors. However. Some researchers have found that the largest CEO performance incentives came from ownership of the firm's shares. rings. the backdating of . The size of the premium varied by market. Not all firms experience the same levels of agency conflict. who had no management ties. Some examples of ownership structures include pyramids. and less interested in the welfare of their shareholders. The results suggest that increases in ownership above 20% cause management to become more entrenched. Egypt and Russia). and webs. Low average levels of pay-performance alignment do not necessarily imply that this form of governance control is inefficient. in particular. undertook formal evaluation of its directors. In a study of five year cumulative returns of Fortune Magazine's survey of 'most admired firms'. whilst the 'least admired' firms returned 80%. and external and internal monitoring devices may be more effective for some than for others. cross-share holdings. It is unlikely that board composition has a direct impact on profitability. rather than the short-term. from 11% for Canadian companies to around 40% for companies where the regulatory backdrop was least certain (those in Morocco. to locate the ultimate owner of a particular group of firms. [edit]Corporate governance and firm performance In its 'Global Investor Opinion Survey' of over 200 institutional investors first undertaken in 2000 and updated in 2002. In a recent paper Bhagat and Black found that companies with more independent boards are not more profitable than other companies. The following examples are illustrative. Antunovich et al.way in which shareholders interact with firms and. [edit]Board composition Some researchers have found support for the relationship between frequency of meetings and profitability. and was responsive to investors' requests for information on governance issues. that point of view came under substantial criticism circa in the wake of various security scandals including mutual fund timing episodes and. performance of the company. while others found no relationship between external board membership and profitability. Some argue that firm performance is positively associated with share option plans and that these plans direct managers' energies and extend their decision horizons toward the long-term. [edit]Remuneration/Compensation The results of previous research on the relationship between firm performance and executive compensation have failed to find consistent and significant relationships between executives' remuneration and firm performance. On the other hand. one measure of firm performance. research into the relationship between specific corporate governance controls and some definitions of firm performance has been mixed and often weak. McKinsey found that 80% of the respondents would pay a premium for well-governed companies. while other researchers found that the relationship between share ownership and firm performance was dependent on the level of ownership. whenever possible.

sue and be sued. [edit]See also Advantages and Disadvantages of Forming a Corporation Share: Print More Related Articles y y y Advantages and Disadvantages of C Corporations Costs of Incorporating Avoiding Personal Liability for Business Debts and Claims Sponsored Links y y y Forming a Corporation in Wyoming Ask a Business Lawyer Online Now Incorporate Business Online A corporation is defined as a legal entity or structure created under the authority of a state's laws. consisting of a person or group of persons who become shareholders. a corporation can enter into contracts. A particularly forceful and long running argument concerned the interaction of executive options with corporate stock repurchase programs. The entity's existence is considered separate and distinct from that of its members.S.option grants as documented by University of Iowa academic Erik Lie and reported by James Blander and Charles Forelle of the Wall Street Journal. Like a real person. . pay taxes separately from its owners. Incorporation can be a complicated process. You may choose to hire an attorney to guide you through the process (read Do I Need an Attorney to Form a Corporation? for more information). in part. A compendium of academic works on the option/buyback issue is included in the study Scandal by author M. Standard & Poors 500 companies surged to a $500 billion annual rate in late 2006 because of the impact of options. and do the other things necessary to conduct business. Gumport issued in 2006. and various alternative implementations of buybacks surfaced to challenge the dominance of "open market" cash buybacks as the preferred means of implementing a share repurchase plan. Numerous authorities (including U.S. Federal Reserve Board economist Weisbenner) determined options may be employed in concert with stock buybacks in a manner contrary to shareholder interests. use of options faced various criticisms. A combination of accounting changes and governance issues led options to become a less popular means of remuneration as 2006 progressed. corporate stock buybacks for U. These authors argued that. Even before the negative influence on public opinion caused by the 2006 backdating scandal.

shareholders do not participate in the operations of the corporation. Owners of a corporation only pay taxes on corporate profits paid to them in the form of salaries. who elect a Board of Directors. And when you're ready to incorporate. which then elects the officers. But every year.Regardless of the tack you take. The personal assets of shareholders are not at risk for satisfying corporate debts or liabilities. Shares of corporations are freely transferable unless shareholders have "buy-sell" agreements limiting when and to whom shares may be sold or transferred. tens of thousands of businesses choose to incorporate online without the use of an attorney. A business owner who works in his or her own business may become an employee and thus be eligible for reimbursement or deduction of many types of expenses. Also. In a small corporation. and dividends. Because a corporation is considered a separate legal entity. at the corporate rate. The built-in stock structure of a corporation makes it attractive to investors. Since a corporation is a separate legal entity. . y Corporate tax treatment. the shareholders have limited liability for the corporation's debts. It costs money to incorporate. For example. Other than the election of directors. and elects officers ² usually a CEO. Advantages y Limited liability. and is not terminated or dissolved even when shareholders die or sell their shares. Board of Directors. bonuses. vice president. Disadvantages y Fees. Freely transferable shares. The owners of a corporation are shareholders. Shares of corporations are freely transferable. y Operational structure. y Owner/employee. the lines between the shareholders. on any profits. because as a separate entity. A corporation continues to exist until the shareholders decide to dissolve it or merge with another business. and secretary ² to follow the policies set by the Board. and attorneys' fees. make sure to read Once You've Decided to Incorporate. y y Perpetual existence. including health and life insurance. Corporations have a set management structure. basic incorporation before filing fees at a site like LegalZoom. securities laws may restrict the transferability of shares. y y Attractive investment. the existence of a corporation is not dependent upon who the owners or investors are at any one time. One of the key reasons for forming a corporation is the limited liability protection provided to its owners. Capital incentive. and manage the corporation on a day-to-day basis. and officers tends to blur because the same people may be serving in all capacities. The Board of Directors is responsible for managing and exercising the rights and responsibilities of the corporation. take into consideration the advantages and disadvantages listed below before you embark on incorporating your company. The stock structure also allows corporations to attract key and talented employees by offering them an ownership interest in the form of stock options or stock. a first-year franchise tax prepayment. fees for various governmental filings. The Board sets corporate policy and the strategy for the corporation. The corporation pays taxes. There are four types of fees: a fee to file the Articles of Incorporation with the Secretary of State. costs just $99. A corporation continues to exist as a separate entity. it pays taxes separate and apart from its owners (at least in the typical C corporation).

including the ability to sue or be sued and to hold property. meaning an LLC avoids the double taxation inherent to the C corporation form. and licenses must be maintained. members may freely transfer their interest in losses and profits. Since corporations have a perpetual existence. including meetings of shareholders and Board of Directors. Purpose 1. Most states implement the same rules for LLCs as they do for corporations. 2010 The main differentiations of a limited liability company (LLC) are its limited liability and simultaneous pass-through taxation. including restrictive transfer of ownership. and LLCs have the same powers. y Tax consequences. Dissolution does not happen automatically.eHow Contributor updated: May 10. and distributing the remaining assets to shareholders. Some jurisdictions can complicate how shares in an LLC are transferred. when there are no more members. S corporations can mitigate this tax or another online incorporation service. upon consent of all members. Advantages & Disadvantages of a Limited Company ByMario McDaniel. y Dissolution. pass-through taxation. including gathering corporate assets. records must be kept of corporate actions. If you're ready to incorporate now and do not need to use a lawyer. to receive the benefits of being a corporation. . An LLC ceases to exist when its period of duration expires. y Paperwork. upon an event declared in the articles of incorporation or when ordered by a court to dissolve. An LLC is abusinessentity designed to give its shareholders the benefits of both a corporation and a partnership. Advantages 3. most outside investors typically stay away from LLCs and often require firms to change their corporate structure before venture or angel capital is invested. Most states do not require that names of shareholders be a matter of public record. This hybrid form allows the company owners to have limited liability from debts and lawsuits and to be taxed federally as a partnership. check out LegalZoom. y Disclosure of names of corporate officers and directors. Paperwork is a huge component of the corporate formalities that must followed. this entity gives an entrepreneur the best of both worlds.y Formalities. Even though an LLC may sound like the best possible entity for business purposes. Disadvantages 4. and because of this. however. business bank accounts and records must be maintained and kept separate from personal accounts and assets. C corporations have potential double-tax consequences ² once when the company makes its profit. In essence. The General characteristics of an LLC can be summarized in three major points: Members and managers usually are not liable for company debts. many states require that the names and addresses of corporate officers and directors be listed on one or more documents filed with the Secretary of State. A corporation's officers and directors are charged with responsibility for dissolving the corporation. and a second time when dividends are paid to shareholders. General Characteristics 2. Reports and tax returns must be compiled and filed in a timely fashion. which means that each shareholder or member is liable only up to the amount he invests. it does have disadvantages. The duration of a limited liability company can end with the withdrawal of one member. The proper corporate formalities of organizing and running a corporation must be followed. A corporation can be dissolved voluntarily or involuntarily. states provide a mechanism for dissolving a corporation and liquidating its assets. The main advantages to an LLC are: limited liability. the duration or life of an LLC can be continuous in many states. paying creditors and outstanding claims.

Cost Historic data. smaller dividends and complex set-ups often deter small. including income and expenditures.adamshk. Minimum Premium of Rs 25000 / Year* Delaware LLC Formationwww2. These records must be kept for at least seven years and are used to complete the corporation's tax returns every year. if a business owner plans to receive outside funding via venture capital or angel investors. as it must not only pay taxes and employee insurance. Though they have many advantages. Taxes 2.Siemens. must be made available upon request. .com/Answers the world's toughest questions. are very Professional to set up HK Company. these profits can become diluted because they must be evenly distributed among all shareholders.and medium-sized business owners from setting up private limited companies. A PLC can be very expensive to create.html+disadvantage+of+acompany&cd=2&hl=en&ct=clnk&gl=in#ixzz14t8BaLET Disadvantageof Being a Private Limited Company ByNellie Day. Many private limited companies. for instance--there are also many disadvantages. meaning that lawyers and accountants almost always need to be involved in the PLC from the start. which can be costly.valisinternational. other options should be considered as well.Conclusion 5. information concerning the company is made public. the ability to make agreed-uponbusinessdecisions and business stability--the business is not interrupted by events such as the death of a shareholder. Need Life Insurance?www.ehow. Unfortunately. but also anylegalfees or other incidentals involved in the business. US Office services and more. or PLCs. PLCs must also pay taxes and insurance for their employees. Profit Sharing 1. Incorparate HK Let Us Do Your Investment Planning Financial Advice w/ Personal Touch Read more:Advantages & Disadvantages of a Limited Company | We also provide US Bank Accounts. US Office services and more.eHow Contributor updated: May 10. Account balances and details about the company's directors.valisinternational.One week only! Delaware LLC Formationwww2. Siemens answers:www.com We also provide US Bank Get More Return on your Investment. Company ProfileEconomicTimes. Registered directors of PLCs must maintain impeccable records of profits and losses. because it eliminates double taxation but still offers the protection of a corporation. Shareholders in a PLC are not able to sell or transfer their shares to the general public. including their names and contact information. No need to come HK. Charts & Annual Reports on All listed Companies! Bajaj Max Advantage ULIPBajajallianz-Maxadvantage. An LLC is often a good starting point for manysmall businesses. High taxes. PLCs can also be quite complex. The 50 or so shareholders that comprise a PLC must keep their shares and cannot trade them on any stock exchange. No Trading including shareholders' limited liability.indiatimes. Lack of Privacy 5. 2010 Private limited companies are often considered the United Kingdom's version of limited liability companies. Even though shares in a PLC cannot be publicly traded. and many PLCs have up to 50 shareholders.

com For Better Roles.000 or Inc. it is not always the business structure for everyone. Better Salaries Post Your Resume Free on Naukri. Chapter If the profit from the business is not significant there may not be enough income to take advantage of the tax and other benefits of a corporation.comhttp://webcache. fees could run between $500 to $2.ehow. (Please see how you can have New Magnolia. Also. If you incorporate with a lawyer. form your corporation in Mississippi for much less.) 2. Company Types Table of Contents What Are Company Types? Company Type Categories Default Company Types Additional Company Types How Company Types Are Assigned Viewing and Managing Company Types Adding a Company Type . it is usually more costly to set up a corporation than any of the other major business structures. Maintaining a corporation requires more paperwork and record keeping than sole proprietorships. Each individual state has its own legal procedures and regulations for forming and maintaining a corporation in good standing.Best Jobs in BanksNaukri. You may decide not to incorporate due to one of the following reasons: 1.html+disadvantage+of+acompany&cd=3&hl=en&ct=clnk&gl=in#ixzz14t8NUUB6 Disadvantages of Incorporating While it would appear that the argument for incorporating is Read more:Disadvantage of Being a Private Limited Company | eHow.

Staff and administrators may inherit basic access the same way. To make it easy to search for companies by membership type. They may also be associated with roles that grant access. If Kavi Membership is installed on your site. Back to top Company Type Categories Your organization's website may have only one category of Company Types: 'General' Company Types. General Company Types General Company Types are used to classify companies. Contact Types is this inheritance of roles through the company's Company Type(s).e. rather than everyone in a company. most organizations create a Company Type for each . For example. Types and Membership Types. When a Company Type has roles associated with it. The most significant difference between Company Types and other types (i. General: Assigned through Membership Only On sites with Kavi Membership. For this reason. In company-based organizations. and possibly the 'wg_access' role. This type usually confers the 'member' role. Company Types are used to classify companies. and on sites without Kavi Membership. which provides access to Kavi Groups. Member Companies are assigned a Company Type when they join the organization. users who belong to a company with this Company Type inherit these roles. The Company Membership Type is configured to assign the Company Type automatically assigned to a company when it acquires a certain type of membership. they are likely to confer the 'member' role. you'll also have the Category 'General : Assigned through Membership Only'. A few organizations have an 'Admin' Company Type that is assigned to organization or management company staff. User Types. which gives them access to Member Areas of the organization's site. Roles that grant administrative or editorial access are usually associated with User Types so they can be assigned to specific users.. the majority of Company Types correspond one-to-one to a specific Company Membership Type.What Are Company Types? As the name implies. Company Types usually confer roles that provide Member Area and Groups access only. the majority of site users inherit basic access privileges through Company Types assigned to their company. This document assumes you are familiar with Roles. When people who belong to this company sign up asCompany Representatives they inherit the 'member' role.

without any additional configuration. If there is one. or a single Company Type may correspond to multiple Company Membership Types or several Company Types may be assigned through a single Company Membership Type. 'Groups Access'. A privileged Company Type may be created and assigned to this "company" to grant the organization staff the roles and access permissions they require. Back to top Default Company Types There are only two default Company Types. When a company is assigned a Company Type with roles. This type is installed so that Members Area access can be granted to users out-ofthe-box. possibly including a "company" added to group organization staff. which confers the 'wg_access' role and access to Kavi Groups may also be in use on your website. Some websites use this role. most users acquire their basic access privileges through a Company Type assigned to their company. or as potential members. but some base Kavi Groups access on the 'member' role. For example. its users inherit the roles and access privileges. which is associated with the 'member' role. Whatever the ratio of correspondence. but they may not be in use on your website. Back to top Additional Company Types . Since most organizations prefer to assign administrative access to select individuals. such as the default 'member' role that grants access to Member areas of the site. confers access to Member Areas of the site and Member Area Tools. area of interest. it may be assigned to only one or two companies. there may not be any Admin Company Types on your website. Company Types assigned through Company Membership Types are usually associated with roles that confer access privileges. They are usually assigned to staff who belong to the organization or a staff company. In organizations that offer memberships to companies. Admin Company Types Admin Company Types confer roles that grant access to Admin Area tools. it is important that at least one of the Company Types has a name that is instantly recognizable when searching for companies with a given Membership Type in searches. Depending on the membership structure. General types without roles may be used classify users by geographic region. 'Members Area Access'. there may be a one-to-one correspondence between these types (so that every Company Membership Type has a single corresponding Company Type).Company Membership Type and assign the same name (or similar names) to both. etc. a 'Board' Company Membership Type and a 'Board' Company Type.

g. 'Asia-Pacific Region'. types assigned to nonmembers to indicate which sector of the community they fall into (e. Examples of additional Company Types include types that mirror Company Membership Types (e. it is is preselected. The administrator may check additional Company Types if desired. the data file may specify one or more Company Types. use the Add a Company Type tool. but any companies that didn't have a type would be harder to retrieve in searches. the Organization Admin can edit the assigned Company Types through the Edit a Company tool.. In Company-based and Mixed Organizations In company-based organizations. most users inherit the roles required to access the website through Company Types assigned to their company. and general types that may be assigned to members and nonmembers alike to classify them according to geographic area or area of interest (e.. Back to top How Company Types Are Assigned It isn't mandatory for every company to be assigned a Company Type. There is probably one Company Type for every Company Membership Type. 'Adopter'. and may unselect the default.g. An Organization Admin adding a new company manually through the Add a Company tool may assign a Company Type. 'Sponsor'). 'Founding'. or one may be assigned automatically. To add a Company Type. Company Types may convey roles that grant access to the Members Area or Kavi Groups. If the organization allows nonmembers to login. 'Academic'). If there is a default Company Type for a company with this Company Purpose. so they can access Member Area Tools that allow them to manage their personal account data. 'Electronics'). In Individual-based Organizations . Member Companies are assigned types through their membership. It is unusual for them to convey higher-level access. y After a company is added. or a Super Admin may use Upload Data when Company Types for multiple companies need to be edited. Companies may be automatically assigned 'Members Area Access' and 'Groups Access' Company Types when they are added to the database. When a Super Admin adds companies in bulk through the Upload Data tool.. y y y A Company Type may be assigned automatically as a company is added to the Pending tables during the membership application process. these users need to acquire the 'member' role (and possibly the 'wg_access' role as well). and deleted if no longer needed.g.Additional Company Types can be added as required. If Kavi Membership is installed.

Organization Admins Organization Admins can view. edit and delete non-default Company Types. To Staff If the organization has a Company Type specifically for Staff Companies.In individual-based organizations or mixed organizations. Back to top Adding a Company Type . An individual-based organization may not have any additional Company Types. Users Company Types are not visible to regular users. This is especially true of organizations that use one or two Company for Individuals to group all Individual Members. Organization Admins who are managing a company or company can click the link to the View Access Configuration page to view all available types and roles on the website. Super Admins Super Admins can view and manage Company Types through the Manage Company Types tool. You can change which roles are associated with a Contact Type by editing the type. Super Admins can edit default Company Types as required. it commonly has no roles. and assign or revoke. and add. In some cases. and can view all installed types and roles through the View Access Configuration tool. company's Company Types through the Manage a Company tool. or may have one that applies only to Staff Companies. Staff Company may be associated with high-level roles such as 'org_admin'. Company Administrators Company Types are not visible to company administrators. Back to top Viewing and Managing Company Types All Company Types installed on the site are managed through Kavi Members. or may confer just the 'member' and 'wg_access' roles only. Individual Members may acquire basic access to Member Areas of the website through Company Types.

1. Tips These types belong in the category 'General (only through membership)'. Every organization's membership structure is unique. you may need an 'Affiliate' Company Type to allow these members to be retrieved as a group. semantic tagging or other needs that aren't met by the default set. or else you should associate the default 'Member Area Access' Company Type with the Company Membership Type.Super Admins may add Company Types for Company Memberships. here are some hints. a Company Type assigned through a Sponsor Membership could be named 'Sponsor'. 'Academic Sector' and 'Government Sector'. Table 15.. Naming Conventions If your organization has multiple membership types at the same general level of membership. Configuring Company Type Options Option Tips Company Types used to classify companies by their membership type should be named after the membership type they represent so they can be instantly recognized in pull-down lists. such as different types of 'Affiliate' memberships. 'company_admin') won't be available when configuring Company Types. In most cases. Company Types may be added and named after the role they confer. only the 'member' and 'wg_access' role should be associated with buildyour-own Company Types (if any). so these hints aren't universally applicable. At least one of the Company Types assigned through membership should be associated with the 'member' role to grant access to the Members area. Default roles reserved for Contact Types (e. be sure to update the description to reflect the new level of access. y y . or edit descriptions or roles. Go to Manage Contact Types and click the link to Add a Company Type tool. For example. Adding Company Types for Company Memberships If you are adding a type to be assigned to companies when they acquire a company membership. Description The description should spell out any access granted through the type. If you edit a default type by adding or removing roles.g. such as 'Business Sector. You may also need to add Company Types to distinguish the different membership types under the 'Affiliate' umbrella. so that multiple Company Types are automatically assigned when a company acquires this type of membership. Use the Edit a Company Type tool if you want to rename any one of the default Company Types. Roles On sites where additional roles are added to provide access to areas or support functionality created by Kavi Web Developers.

y Most Company Types assigned through membership correspond 1-to-1 to an Company Membership Type.www. Service companies usually won¶t have a cost of goods sold as they aren¶t selling a product. and others assign a single Company Type through multiple membership types. accountants. the same Company Type might be appropriate for all these Company Membership Types.Siemens. Crafts Ads MerchandisingGarments ManufacturingBusiness to BusinessGlobal Business CompanyBusiness There are three different types of companies and each type of company will have a slightly different financial statement presentation. . 1. actuaries and lawyers. The main difference is with the cost of goods sold. Effective and Easy!Google.If your organization uses the 'wg_access' role to provide access to Kavi Groups. For Springs . As the other two company types are selling a tangible product. if your organization has member chapters. Merchandising and Manufacturing Craft Companies By Maire Loughran. if there are multiple types at the same level that have only slight differences. they are selling an idea. one that is assigned to everyone with this type of membership and a second type assigned only to members in this region. Some organizations assign multiple Company Types through a single membership type. I can only think of one type of art or craft business that would fall under this classification. And that would be an arts or craft designer who comes up with the designs for other related businesses but doesn¶t make any product for resale.Fast & In-lineAutomatic & On demand / many types Tested & Inserted into the assemblywww. members might be assigned two types. Arts and Crafts Service Company: Examples of services type companies are doctors. associate the role that controls access to this area as well. include this role or associate the default 'Groups Access' Company Type with the membership type. they will have a cost of goods sold. Back to top Company Types The Difference Between Promote Your BusinessAdd Your Location and More for Free to Google Maps. architects. Do whatever makes the most sense for your organization's membership structure. If there are areas that are unique to your website that this type of member needs to be able to Guide See More About: y y y y y types of companies service merchandising manufacturing cost of goods sold Sponsored Links Siemens answers:The digital factory Answers for industry. but this isn't applicable to all membership structures. This approach is uncommon and the Company Types are generally created by Kavi when implementing this kind of built-to-suit solution. About.

If you only make design prototypes. Fashion designers come to my business looking for specific surface design of fabric for their garments. As you can tell. the jewelry designer creates multiple copies of the piece of jewelry and sells the jewelry to either merchandisers or the consumer. . it is a great marketing tool. 2. If you make and sell your product directly to the customer you are both a merchandiser and a manufacturer. design and color scheme and use software to replicate the design in a shareable image file that the designer can send to their fabric dyers. Most service type companies only make purchases for the job at hand so they won¶t carry an inventory ± purchases will be expensed. Arts and Crafts Manufacturing Companies: This type of business makes the tangible arts and crafts products that are sold to either merchandisers or directly to the customer. I have been in storefronts and galleries where a portion of the shop was the artist¶s studio.a jewelry designer that designs and makes a sample piece of jewelry based on the customer¶s ± maybe a jewelry manufacturer . To me it is the best of both worlds if an artist or crafter can generate enough business to have their own retail location to sell their products. In essence. I am paid for my design work but I am not involved in the manufacturing process. One example . arts and crafts businesses are both merchandising and manufacturing companies. In many cases. these types of arts or craft businesses are consultants. online shop or boutique. Going back to the service company jewelry designer. it¶s possible for you to wear different company type hats as an owner of an arts or crafts business. While this is too much of a distraction for me and somewhat of a potential lawsuit waiting to happen depending on the type of tools and chemicals in use.a consumer like you or me. that type of craft business would also fall into the service category.specs. I come up with the pattern. Designers who only sell the concept have a service type business. Arts and Crafts Merchandising Companies: These are retail businesses such as a gallery. One major tipoff that you¶re a service type of craft company is if you don¶t have any appreciable inventory. If you make your product and sell it to a merchandiser you¶re a manufacturer only. craft store. at shows or in a storefront. If they do retain some purchases. 3. You handcraft your products and sell them yourself either online.One example of this can be a fabric designer. instead of selling the design to another manufacturer. A merchandiser purchases goods from an art or craft business and in turn sells the goods to the end user . the amount is inconsequential especially when compared to a merchandising or manufacturing company. after creating the prototype.

Business to Business Franchises M-N-O-P What Type of Business Entity is Good for an Arts / Crafts Business? y y y y y y y y Maire Loughran Arts / Crafts Business Guide Sign up for my Newsletter My Blog My Forum Advertisement Sponsored Links Fashion Designing CoursesWant to become a Fashion Designer? Apply for Design Course Free Now » Explore Arts / Crafts Business y y y y y Must Reads Start Selling Online How to Set Up Your Craft Business Three Types of Business Entities Getting Over a Sales Slump Figuring Out Arts and Crafts Taxes Most Popular Three Financial StatementsTypes of CraftsCompare Business EntitiesTypes of CompaniesIncome Statements .Suggested Reading y y Artists and Cost of Goods Sold Cost of Goods Sold Related Articles Income Statements Start Up .know more & Apply ! Now! Merchandiser JobsImmediate Requirement in Companies Submit your Resume for Free IDBI Bank SME SolutionsCurrent A/ Top Jobs in ManufacturingTop Manufacturing Companies Hiring Submit your CV on Shine.Arts and Crafts Business Start Up Information Business Service Franchises . BG and Buying XIAMETER® SiliconeSaves you money with market-based pricing and varied buying options.Business Loans.

4. 5. 2. Arts / Crafts Business Home Business & Finance Arts / Crafts Business Business Management Company Typ Set up and register a limited company (private or public) Types of limited company There are four main types of company: y y y private company limited by shares private company limited by guarantee private unlimited company . Special Features 10 Things You Can Do Today to Improve Your Credit Easy steps to take control of your credit card debt.More Learn to Save Stop living from paycheck to paycheck and help ensure a comfortable future.y y y y y y y y y y y y y y y y y y y y See More About: types of companies service merchandising manufacturing cost of goods sold By Category Starting Your Business Marketing and Advertising Selling at Craft Shows Selling Online Opening a Storefront Consignment Sales Going Wholesale Legal Issues Business Plans Resources Accounting and Pricing Taxes Business Management Profiles Glossary of Terms About. More 1.

Private company limited by shares Most private limited companies are owned by their shareholders and are limited by shares. The members' liability is limited to the amount they have agreed to contribute to the company's assets if it is wound up. For more information on changing from a private limited company to a plc. Private company limited by guarantee Companies limited by guarantee do not have shares. see our guide on company changes you must report to Companies House.y public limited company (plc) Most small and medium-sized businesses that opt for limited company status become private limited companies. Private unlimited company This type of company may or may not have a share capital but there is no limit to the members' liability. This structure is often used by charities. There are relatively few unlimited companies. A private company limited by shares can convert into a plc. and its members are guarantors rather than shareholders.commonhold companies and social enterprises to limit the personal liability of their directors and trustees. This means that the liability of each member is limited to the amount unpaid on shares held by them. See our guide on how to set up a social enterprise.000 or the prescribed equivalent in euros must have at least two directors and a qualified company secretary See the page in this guide on requirements for public limited companies. but it will need to re-register in order to do this. PLCs: y y y can raise money by selling shares on the stock market must have share capital of at least £50. Right to Manage. Naming your company You cannot choose a name that is the same as an existing company and you should avoid a name: y that people may find offensive . PLCs This type of company has a share capital and limits the liability of each member to the amount unpaid on their shares.

a local authority or specified public body. See our guide on how to choose the right name for your business.y that is 'too much like' an existing company name unless it is part of the same group You will need to obtain special approval for a name that: y y Suggests a connection to a government department. you are not allowed to choose a name which includes words that are potentially misleading. a devolved administration. such as 'international' if you are a UK-only business. For example. Click on Legal Agreements Company Secretarial Company Formation . y y Prev Next Subjects covered in this guide y y y y y y y y y Introduction Registration documents and forms The company's officers Types of limited company Requirements for public limited companies Where to register your company and get help Tax matters of a limited company Checklist: setting up and registering a limited company (private or public) Right to manage companies and commonhold associations CALL US ON 08456 800 727 HOME MEMBER LOG IN WHAT TYPE OF COMPANY SHOULD YOU FORM? Viewing: Company Formation » Guide » Types of Company We form the following types of company. Includes any sensitive words and expressions that require approval from Companies House.

a type of company to learn more. Please consult ourWebsite Terms of Use for further information. The information provided on this website is intended as a View details of our service here. general guide only. Standard Limited Company 2. Public Limited Company (PLC) Other types of business structure: 4. It is not exhaustive or tailored to your individual circumstances. View details of our service here. About Us Contact Us Careers For further information please read our Company Formation Guide. Company Limited by Guarantee 3. Companies formed by other organisations are likely to have different features. Free Guidance Company Formation Shareholders Agreement Partnership Agreement Reduction Of Share Capital LLP Agreement Share Buyback Our Fees 1. . Is your choice of companyname available? Click here to check. Sole Trader The description of the above types of company only applies to companies formed by Legal Clarity.