posobie

Term	Definition

Dealership

Invest

Liability

License

Regulation

Responsibility

Restriction

Tax

Voting

3.Compile the table of advantages and disadvantages for each business structure mentioned.

VI.Look through the text and translate the sentences with the words in bold

type.

Text III. Corporations

Corporations are another way of doing business in the United States, especially where large investments of money are needed. Although the word corporation makes people think of big businesses like General Motors, Ford, IBM. FedEx, Exxon, and John Deere, it is not necessary to be big in order to incorporate. Obviously, many corporations are big. However, incorporating may be beneficial for small businesses, too.

Although agribusiness corporations are limited in number relative to sole proprietorships, they are increasing in number and importance. This increase is due primarily to the increasing requirements for large amounts of capital in modern agriculture and the limited liability characteristic, which allows individuals to invest in a business without personal liability beyond the amount of investment.

A corporation is an organization owned by many people but treated by law as though it were a person. A corporation is a legal entity, separate from the people who own it or work for it. It can own property, pay taxes, make contracts, sue and be

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sued in court, and do other things a person can do. If you want to form a corporation, you issue stock, or shares in the ownership of your corporation. The new owners, called stockholders, pay a set price for their shares. Each stockholder has one vote in the major decisions made by the corporation for each share of purchased stock. Some large corporations have over a million stockholders.

Because a corporation often has numerous owners who are not involved in the management of the business, strict regulations are designed to protect each owner. Therefore, corporations have more legal regulations to meet than any other type of business. For example, each corporation must obtain a legal charter from a state government before it can operate: no other type of business is required to do this. Corporations can be chartered in any state. They must then elect a board of directors. Most state laws governing the formation of corporations are similar: it generally begins with filing articles of incorporation application. If the articles are in agreement with state law, the state will grant you a corporate charter, which is a license to operate from that state.

The articles of incorporation are usually filed with the secretary of state's office in the state in which the company incorporates. The articles contain:

•the corporation's name;

•the names of the people who incorporated it;

•its purposes;

•its duration (usually perpetual);

•the number of shares that can be issued, their voting rights, and any other rights of the shareholders;

•the corporation's minimum capital;

•the address of the corporation's office;

•the name and address of the person responsible for the corporation's legal service;

•the names and addresses of the first directors;

•many other public information the incorporators wish to include.

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Before a potential corporation can so much as open a bank account or hire employees, it needs a federal tax identification number from the Internal Revenue Service.

In addition to the articles of incorporation listed, a corporation also has bylaws. These describe how the firm is to be operated from both legal and managerial points of view. The bylaws include:

•how, when, and where shareholders' and directors' meetings are held, and how long directors are to serve director's authority;

•duties and responsibilities of officers and the length of their service;

•how stock is issued;

•other matters, including employment contracts.

The stockholders of a corporation elect a board of directors, which is a group of individuals chosen to make the decisions for the company. They appoint officers to make day-to-day decisions for the corporation. The officers, such as the president, vice-presidents, and treasurer, make most of the day-to-day decisions for the corporation.

In regular type of business, the original owners sell stock to investors to raise capital. The investors, who also become owners, buy the stock in hopes that the company will do well. If the company does do well, it may pay dividends on their shares of stock. Money paid to a shareholder on a share of stock is called a dividend. The amount of the dividend is set by the board of directors and is based on the amount of profit made by the corporation. If no profit was made, there may be no dividend. However, if the company is reasonably profitable, the value of the stock will increase because more investors will want to own it. Of course, shareholders can lose money if the share price falls below the price they paid for it.

In regular corporations, voting is done by those owning common shares of stock. Each share of stock is worth one vote. Policy decisions are made by the stockholders and the board of directors. The corporation is financially liable. Agribusiness corporations of this type include Ralston Purina, Case International, Ciba-Geigy, and many others.

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Small Business or Family Corporation is a unique government creation that has the characteristics of a corporation but is taxed like sole proprietorships and partnerships. These corporations have the benefit of limited liability. The paperwork and details of these corporations are similar to those of regular corporations. They have shareholders, directors, and employees, but the profits are taxed as the personal income for the shareholders.

Regular corporations must first pay taxes on the profits of the firm, and then the income is taxed again as individual income when stockholders receive their dividends. This is commonly referred to as double taxation. Although regular corporations are usually required to pay the corporate tax, family corporations are not taxed as regular corporations and do not pay the double tax.

Not all businesses can become family corporations. For a corporation to qualify it must meet the following requirements:

•All stockholders must be U.S. citizens or resident aliens.

•Only one type of stock is allowed.

•The owners must not be members of an affiliated group of corporations.

•The owners may not own 80 percent or more of the stock of another corporation.

•Complete agreement of all stockholders must be achieved to pass profits to the owners.

•Not more than 25 percent of the gross income can come from rents, royalties, dividends, and interests.

•No more than 80 percent of gross income can come from outside the United States.

This type of corporation is very popular in the agriculture industry and its numbers are increasing rapidly.

1. Answer the following questions:

1)What is the difference between a corporation and a partnership?

2)What can a corporation own?

3)Who is a stockholder?

4)What do the articles of incorporation contain?

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5)What do bylaws include?

6)Who are the officers? Enumerate them.

7)Who sets the amount of the dividend?

8)What requirements must family corporation meet?

2. Find the correct English translation of the Russian economic terms:

ИНН, ООО, юридическое лицо, совет директоров, акционер, страхование,

филиал, голосование, официальное разрешение, налогообложение, член правления, предъявлять иск, устав.

3. Fill the blanks according to the text:

1)Agribusiness corporations are limited _________ relative to sole proprietorships.

2)A corporation is _________, separate from the people who own or work for it.

3)The new owners called _________, pay a set price for their shares.

4)Each corporation must obtain _________ from a state government before it can operate.

5)The articles of incorporation are usually filed with the _________ in the state in which the company incorporates.

6)Before a potential corporation can so much as open a bank account or hire employees, it needs _____________ from the Internal Revenue Service.

7)____________ describe how the firm is to be operated from both legal and managerial points of view.

8)____________ is a group of individuals chosen to make the decisions for the company.

9)_______________ make most day-to-day decisions for the corporation.

10)The company may pay ____________ on their shares of stock.

4. Make the annotation of the text.

VI. Look through the text. Name advantages and disadvantages of cooperative. Explain the meaning of the words in bold type.

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Text IV. Cooperatives

Cooperative is the third type of corporation. A large corporation will generally find it easy to raise capital, or money, for expansion by issuing stocks. However, this is not true for small agribusiness corporations. In fact, it is difficult to sell stock in a small corporation since it represents a minority interest in a company that is not publicly traded. Large corporations are often formed when large amounts of money are needed to start or expand a business. Each stockholder has limited liability. This means that the stockholder is responsible for the losses of the corporation only to the extent of his or her investment. Because a corporation is a legal entity apart from the owners, the corporation does not dissolve if the owners sell their shares. Ownership can be transferred to new stockholders and the corporation goes on.

A cooperative is a corporation formed to provide goods and services to members either at cost or as near to cost as possible. Cooperatives are not formed to make profits, but to serve the people who own shares in the organization. Agribusiness cooperatives are very popular.

In the agricultural industry there are three kinds of cooperatives: supply

(purchasing) cooperatives, marketing cooperatives, and service cooperatives. Supply (Purchasing) Cooperatives act mostly as purchasing associations for such

things as feed, seed, fertilizer, and fuel. Supplies for production agriculturalists are bought in quantity for resale to members. The big advantage is that by buying in large quantities, cooperative members are usually able to save money over what they would have paid individually. In some cases, the supply cooperative can manufacture its own supplies instead of buying from a private company.

Market Cooperatives mostly assist production agriculturalists in marketing agricultural products by finding buyers who will pay the highest price. Some marketing cooperatives process agricultural products such as milk and vegetables and sell them directly to consumers and retailers. Examples of marketing cooperatives are fruit growers' cooperatives, and dairy marketing cooperatives.

Service cooperatives provide their members with a specific service, rather than a product, that members cannot afford to provide individually. Service cooperatives are not as numerous as marketing and supply cooperatives but they do provide valuable services to many farmers. Specific examples of service-type cooperatives include farm credit services, banks for cooperatives, rural credit unions, mutual

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irrigation cooperatives, dairy herd improvement associations, and artificial breeding cooperatives. Rural electric and telephone cooperatives were once primarily made up of farmers, but now they serve all rural residents, which includes more non-farmers than farmers in many areas. Therefore, these are now considered consumer cooperatives rather than agricultural cooperatives.

According to the National Cooperative Bank, 2 million businesses belong to 20,000 cooperatives (co-ops) nationwide. A good example is the agricultural cooperative. Agricultural cooperatives have become a multibillion-dollar industry.

To give you an idea of the size of typical agricultural cooperatives, consider Farmland Industries, Inc. It is the country's largest agricultural cooperative, with an annual revenue of $4.5 billion. Its 1,800 member cooperatives include 250,000 farmers in nineteen states. Farmland Industries owns manufacturing facilities, oil wells and refineries, fertilizer plants, feed mills, and plants that produce everything from grease and paint to steel buildings. It also offers insurance and financial and technical services and owns a network of warehouses.

Some co-ops serve the general public; others serve members only. For those that serve the general public, the major emphasis is on the members. Voting stock and investment stock are separate in a cooperative, and only the former, also called common stock, gives a person the right to vote on business matters of the business. Investment stock, also called preferred stock, only gives a person the opportunity to invest in the business and, it is hoped, to receive a reasonable return on investment. In some cases, preferred stock is available only to holders of common stock, but some co-ops sell preferred stock to anyone who wishes to invest. In any event, members of the cooperative are encouraged to purchase preferred stock, whereas non-members are discouraged from doing so. The law currently limits the return on cooperative investment to an established percentage above the discount rate (the interest rate that the federal government charges for loans to member banks), regardless of how successful the business is in a given year.

The great disadvantage of cooperatives is that customers will almost never receive the full amount of their shares of the profit because some of the patronage dividend is generally withheld by the cooperative. However, the customer pays tax on the full amount of the patronage dividend received.

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The limited liability company (LLC) is a hybrid business structure that combines characteristics of both a partnership and a corporation. It combines the single-tax treatment of a partnership with the limited personal liability of a corporation. As in a cooperative, LLC owners are called members.

It takes at least two members to form an LLC. Its owners have no restrictions concerning their role in the business. Contrary to common cooperative practice, they are free to become involved in the management of the company. They usually provide the equity capital, but their voting rights are determined by an operating agreement, and not necessarily based on patronage.

In an LLC, members share the profits and losses according to the established operating agreement. However, this percentage of responsibility is usually based on the amount of capital invested and the nature of the work performed by each member. The operating agreement also affords members the freedom to determine how the income is to be divided.

Perhaps one disadvantage of an LLC is the significant expense incurred at startup. A substantial amount of legal work, including the filing of two documents with the

Secretary of State, is required to get an LLC established and operating. These required documents consist of the articles of organization and the operating agreement.

1. Define if these sentences are true or false. Correct the false sentences.

1)A cooperative is a type of a corporation.

2)A small corporation will find it easy to raise capital or expansion by issuing stocks.

3)It is easy to sell stocks in a large corporation.

4)Each stockholder in a large corporation has limited liability.

5)Cooperatives are formed to serve the people who have shares in the organization.

6)Service cooperatives act mostly as purchasing associations.

7)Some supply cooperatives can process agricultural products.

8)Voting stock and investment stock are separate in a cooperative.

9)LLC combines the characteristics of the both a partnership and a corporation. 10)It takes at least four members to form a LLC.

11)The owners of LLC have some restrictions concerning their role in the

business.

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2.Make a summary of the text.

3.Fill the table according to the texts I-IV.

	Type	Ownership	Funding	Taxes	Liability	Responsibility	Profit
						for Decisions	distribution
	Proprietorship
	Partnership
	Cooperative
	LLC

VII. Read of two more business structures. Do they have some advantages as

compared with other?

Text V. Complicated business structures

Many of us eat often at fast-food restaurants. Therefore, we are already familiar with some of the most popular franchises such as McDonald's, Wendy's, and Domino's. A franchise is a contract in which a franchisor sells to another business the right to use its name and sell its products. The franchisee (person purchasing the franchise) buys a system of operation that has proven successful.

Recently, there were over 540,000 franchised outlets in the United States. Outside the United States, McDonald's alone had over 4,500 restaurants.

The parent company (franchisor) prepackages all the business planning. Prepacking generally includes management training and assistance with advertising, selling, and day-to-day operations. In return, the franchisee agrees to run the business in a certain way. Some people are more comfortable not starting their own business from scratch. They would rather join a company with a proven track record by entering into a franchise agreement. A franchise can be formed as a sole proprietorship, partnership, or corporation.

If franchises are so great, why aren't all businesses franchises? Unfortunately, franchises do have drawbacks. First, it takes a large amount of money to purchase most franchises. Second, the owner must share sales or pay a predetermined yearly fee to the parent company. Also, the parent company will limit the owner's management of the franchise.

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A holding company is a company that owns enough voting stock in another firm to control management and operations by influencing or electing its board of directors. Strictly speaking, the term "holding company" might be used to describe any company that owns a majority of shares in another company. Usually, though, the term signifies a company which does not produce goods or services itself, but, rather, whose only purpose is owning shares of other companies (or owning other companies outright). Holding companies allow the reduction of risk for the owners and can allow the ownership and control of a number of different companies.

1.Translate the sentences with the words in bold type.

2.Comment on the common structure of Russian agricultural holding companies according to the picture below.

Figure 3. The structure of the agrarian holding company

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