CORPORATE STRUCTURES
The legal definition of a corporation varies depending on the state it was created in and under the jurisdiction in which it will be headquartered. In other words, a corporate organization can be created in the state the owner resides in or another state that offers better benefits to the business. The business has to pay taxes to whatever state jurisdiction it is in.
The general definition of a corporation is a legal entity created for the purpose of engaging in some type of business. It is owned by shareholders and has a board of directors. The board of directors may feature an inside director who is either a shareholder, upper management, or someone else with a connection to the company. Corporations can be for-profit or non-profit.
One of the benefits of a corporation is that it is a legal entity separate from shareholders so that shareholders are not financially liable for the corporation. Corporate structure helps a business outline the roles and responsibilities of key individuals.
Corporate structure refers to the organization of different departments or business units within a company. Depending on a company’s goals and the industry in which it operates, corporate structure can differ significantly between companies. Each of the departments usually performs a specialized function while constantly collaborating with each other to achieve corporate goals and values.
The corporate structure of a business is how the business is organized. For instance, two separate individuals may decide to open competing beauty brands. One owner opens Earthly Cosmetics and builds her brand around sustainable products and uses a share of profits to support sustainability projects around the globe. The owner of the other company, Beauty Cosmetics, focuses on creating beauty products for black and brown skin tones.
Both Earthly Cosmetics and Beauty Cosmetics are beauty companies. As they are both being established as corporations both businesses will consist of three main components found in typical corporate structures a board of directors, shareholders, and corporate officers.
GENERAL TYPES OF ORGANIZATIONAL STRUCTURE
There are four general types of organizational structure that are widely used by businesses all around the world:
1. Functional Structure: This structure allows for effective communications between people within a department and thus leads to an efficient decision-making process. Under this structure, employees are grouped into the same departments based on similarity in their skill sets, tasks, and accountabilities. Companies with departments such as IT and Accounting are good examples of a functional structure.
2. Divisional Structure: This structure organizes business activities into specific market, product, service, or customer groups. The purpose of the divisional structure is to create work teams that can produce similar products matching the needs of individual groups. A common example of the divisional structure is geographical structure, where regional divisions are built to provide products or services to specific locations.
3. Matrix Structure: Matrix Structure is a combination of functional and divisional structures. This structure allows decentralized decision making, greater autonomy, more inter-departmental interactions, and thus greater productivity and innovation. Despite all the advantages, this structure incurs higher costs and may lead to conflicts between the vertical functions and horizontal product lines.
4. Hybrid Structure: Like the Matrix Structure, the Hybrid Structure combines both functional and divisional structure. Instead of grid organizations. Hybrid Structure divides its activities into departments that can be either functional or divisional. This structure allows the utilization of resources and knowledge in each function, while maintaining product specialization in different divisions. Hybrid Structure is widely adopted by many large organizations.
