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For-profit and non-profit non-profit organization

In modern economic systems, conventions of corporate governance commonly appear in a wide variety of business and non-profit activities. Though the laws governing these creatures of statute often differ, the courts often interpret provisions of the law that apply to profit-making enterprises in the same manner, or in a similar manner when applying principles to non-profit organizations, as the underlying structures of these two types of entity often resemble each other.

Some jurisdictions,Washington, D.C., for instance separate corporations into for-profit and non-profit, as opposed to dividing into stock and non-stock.

Several states also allow a variation of the corporation for use by professionals, for instance, , those individuals typically considered as professionals who require a license from the state to conduct business. In some states, such as Georgia, these corporations are known as professional corporations.

Mutual benefit corporations

A mutual benefit nonprofit corporation is a corporation formed in the United States solely for the benefit of its members. An example of a mutual benefit nonprofit corporation is a golf club. Individuals pay to join the club, memberships may be bought and sold, and any property owned by the club is distributed to its members if the club dissolves. The club can decide, in its corporate bylaws, how many members to have, and who can be a member. Generally, while it is a nonprofit corporation, a mutual benefit corporation is not a charity. Because it is not a charity, a mutual benefit nonprofit corporation cannot obtain 501( c( 3 status. If there is a dispute as to how a mutual benefit nonprofit corporation is being operated, it is up to the members to resolve the dispute since the corporation exists to solely serve the needs of its membership and not the general public.

Criticisms of corporations

As Adam Smith pointed out in the Wealth of Nations, when ownership is separated from management, for instance, the actual production process required to obtain the capital, the latter will inevitably begin to neglect the interests of the former, creating dysfunction within the company. Some maintain that recent events in corporate America may serve to reinforce Smith’s warnings about the dangers of legally protected collectivist hierarchies.

Closely held corporations and publicly traded corporations

The institution most often referenced by the word corporation is a publicly traded corporation, the shares of which are traded on a public stock exchange, for instance, the New York Stock Exchange or NASDAQ in the United States where shares of stock of corporations are bought and sold by and to the general public. Most of the largest businesses in the world are publicly traded corporations. However, the majority of corporations are said to be closely held, privately held or close corporations, meaning that no ready market exists for the trading of shares. Many such corporations are owned and managed by a small group of businesspeople or companies, although the size of such a corporation can be as vast as the largest public corporations.

Closely held corporations do have some advantages over publicly traded corporations. A small, closely held company can often make company-changing decisions much more rapidly than a publicly traded company. A publicly traded company is also at the mercy of the market, having capital flow in and out based not only on what the company is doing but the market and even what the competitors are doing. Publicly traded companies also have advantages over their closely held counterparts. Publicly traded companies often have more working capital and can delegate debt throughout all shareholders. This means that people invested in a publicly traded company will each take a much smaller hit to their own capital as opposed to those involved with a closely held corporation. Publicly traded companies though suffer from this exact advantage. A closely held corporation can often voluntarily take a hit to profit with little to no repercussions, as long as it is not a sustained loss. A publicly traded company though often comes under extreme scrutiny if profit and growth are not evident to stock holders, thus stock holders may sell, further damaging the company. Often this blow is enough to make a small public company fail.

Often communities benefit from a closely held company more so than from a public company. A closely held company is far more likely to stay in a single place that has treated them well, even if going through hard times. The shareholders can incur some of the damage the company may receive from a bad year or slow period in the company profits. Closely held companies often have a better relationship with workers. In larger, publicly traded companies, often when a year has gone badly the first area to feel the effects are the work force with lay offs or worker hours, wages or benefits being cut. Again, in a closely held business the shareholders can incur this profit damage rather than passing it to the workers.

The affairs of publicly traded and closely held corporations are similar in many respects. The main difference in most countries is that publicly traded corporations have the burden of complying with additional securities laws, which, especially in the U.S. may require additional periodic disclosure, with more stringent requirements, stricter corporate governance standards, and additional procedural obligations in connection with major corporate transactions, for instance, mergers or events, for instance, elections of directors.

A closely held corporation may be a subsidiary of another corporation, its parent company, which may itself be either a closely held or a public corporation. In some jurisdictions, the subsidiary of a listed public corporation is also defined as a public corporation, for instance, Australia.