1. Define “incorporation.”
2. Explain the popularity of investing in the capital stock of a corporation.
3. Discuss the necessity and purpose of a board of directors.
4. List the potential benefits gained from acquiring capital stock.
Question: Above, in discussing the possible decisions that could be made about an organization, ownership shares
were mentioned. Occasionally, on television, in newspapers, or on the Internet, mention is made that the shares
of one company or another have gone up or down in price during that day because of trading on one of the stock
markets. Why does a person or an organization acquire ownership shares of a business such as Capital One or Intel?
Answer: In the United States, as well as in many other countries, owners of a business or other type of organization
can apply to the state government to have it identified as an entity legally separate from its owners. This process
is referred to as incorporation. Therefore, a corporation is an organization that has been formally recognized by
the government as a legal entity. A business that has not been incorporated is legally either a sole proprietorship
(one owner) or a partnership (more than one owner).
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