1. Section 1, 2, 3

2. Why would a partnership be able to attract more capital than a sole proprietorship? What is the main weakness of proprietorship?

3. Approximately 90% of businesses in the United States are corporations It is a form of business organization that is recognized by law. It has the right to buy and sell stocks, sue or be sued and enter into legal contracts

4. It is not as easy as 1,2,3 To start a corporation is a formal process First if you want to incorporate or start a corporation you must file for permission from the national government or the state If it is approved, a charter, which is a government document that gives permission to create a corporation is granted The charter will state the name, address, type of business, number of shares of stock, or ownership parts of the firm

5. Stock is ownership parts of the firm or business Sold to investors called stockholders or shareholders Money is used to set up the business If it is successful, it will offer a dividend which is a check representing a portion of the corporate earnings or profit for each shareholder

6. Common stock Represents basic ownership They get one vote for each share owned This vote is to elect a board of directors whose duty it is to direct the corporation They hire professionals to run the business Nonvoting ownership of a corporation Preferred stock

7. Ease of raising financial capital 1.They can sell more stock or expand 2.They can also sell bonds, which is a written promise to repay the lender at a later date The amount borrowed is known as the principal They amount they are paying the lender for borrowing the money is called the interest Revenue is the amount of money a company is bringing in

8. 3. Most talented specialized people work for corporations because they pay the big bucks Organizational chart, shows how different parts relate and who is in charge of what 4. a corporation provides limited liability for its owners You can claim bankruptcy if a you can not pay a debt, which is a court-granted permission not to pay some or all of your debts 5. is unlimited life, the business continues to exist even when owners change

9. 6. ease of ownership, if you don’t want to be part of it anymore you just sell your stock WEAKNESS: 1. it is difficult and expensive to get a charter 2. after you vote for the board shareholders have little or no say 3. must have great records 4. subject to government regulations Page 63

11. In the United States many businesses will merge or join together Combining two or more business to form one single firm Why??? Sometimes because businesses want to be larger More efficient don’t need two presidents etc. Costs less

12. Horizontal merger is when two firms that produce the same good or provide the same service join forces For example? Vertical mergers are two firms involved in two different types of businesses join together Normally to protect themselves against loss (don’t put all you eggs in one basket)

13. Conglomerate is a merger of at least four business making unrelated products This creates diversity and reduced the possibility of loss Example, in the 1970’s the tobacco industry merged with KFC and Del Monte Other large corporations are known as multinationals which have manufacturing and service operations in different countries

14. Multinationals are important because 1. they move resources across national borders 2.They spread new technology throughout the world 3. they generate jobs in areas that need them 4. they produce tax revenue for the host countries WEAKNESSES: 1. because they are large they influence politics 2. they exploit the host company by paying low wages 3. they take jobs away from the United States

16. Nonprofit, similar to a profit seeking organization They work to make the best out of scarce resources They do not sell stocks or pay taxes Examples: schools, medical facilities, churches Cooperative association, a co-op is a voluntary association of people formed to carry on an economic activity

17. 1. consumer cooperative, voluntary association that buys in bulk such as food and clothing to benefit its members. It offers lower prices 2. service cooperative, offers members insurance, credit etc. at a lower cost Example would be a credit union 3. producer cooperative, this helps members sell their products Most in the United States are made up of farmers

18. A labor union is important It is organized to work for its members interests in various matters They speak for workers about hours, wages, health care They are also responsible for collective bargaining, which are negotiations between representatives of labor and management

19. A group of people specialized in an occupation that works to improve working and education Examples: Association of University Professors, American Bar Association Many businesses will combine to promote collective interests: Chamber of Commerce, most cities and towns have these, it promotes the welfare of its communities and sponsors activities and runs educational programs for the community

20. The Better Business Bureau is nonprofit organization sponsored by local businesses to provide information on companies and people can call and complain All levels of government serve as a link between consumers and resources

21. Direct role- some government agencies directly effect production and distribution Examples, the government runs TVA which deals with electricity for 7 states National Defense is also another example State and local government provides fire, police and schools

22. Indirect Roles, sometimes the government acts as an umpire rather than a coach They regulate public utilities- which are companies that offer H2O, energy etc. Because they do not have competitors they regulate how much they charge