Business Structures

1. Business Structures GUIDED READING ACTIVITY

2. The Sole Proprietorship Sole Proprietorships have a number of advantages – owners have complete control over the company, and they get to keep all the profits. However, they also have to come up with all of the start-up costs, work extremely hard, and accept all the risk if the company fails!

3. Partnerships Partnerships have a number of advantages over sole proprietorships : its easier to raise money working with a partner, its easier to divide the workload, and you share the risks of the company failing. However, you also have to share all the profits, and occasionally, arguments will undermine your business.

4. Corporations Corporations are businesses owned by many investors, or stockholders. Corporations can easily raise money to purchase needed resources. As a shareholder, you are a part owner of a company, but you risk only what you have invested.

5. Investing in a Corporation: Being a Shareholder Being a shareholder is a much easier way to own a company than founding your own business. You can invest as much or a little as you please, and you are not responsible for running the company – a board of directors does that for you. The only down side is that you are not likely to make lots and lots of money in the process. Sometimes the corporation will pay dividends during times of profit. Otherwise, you have to sell your shares of ownership in order to make money. The purpose of the corporation is to make more money!

6. The Negative Side to Corporations Because corporations main goal is just to make money, they don’t always act in the most responsible manner. Some corporations used unfair methods to eliminate competition and raise prices on consumers – a move which hurts free enterprise, and hurts consumers, but benefits the corporation and its shareholders. Corporations have used the profit motive to justify poor working conditions, unfair business practices like trusts, pools, or monopolies, and other forms of corruption.

7. Abraham Lincoln warned in the 1860s that Corporations were a threat to American Liberty “I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. As a result of the war, corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed.”

8. Corporations Built the United States Economy On the other hand, companies like Andrew Carnegie’s US Steel company and Rockefeller’s Standard Oil provided the resources to build much of the United States – creating jobs for people and unifying the nation.

9. MONOPOLIES Monopolies are companies which have eliminated all competition in their particular field of the economy. Without competitors, companies can charge extremely high prices, hurting consumers and workingmen. If rivals attempt to emerge, monopolies can usually strangle them out of the market by undercutting them.

10. Trusts Trusts are combinations of businesses which join together in order to decrease or eliminate competition and raise prices. The most notorious of these was the Standard Oil Trust, which had a strangle hold on the petroleum industry for decades.