Types of Business: Economic Structure

Proprietorship: business with one owner who takes all the risks but gets all of the profit.

Partnership: business with two or more owners who share the risks and profits.

Corporation: business that is authorized by law to act as a legal person regardless of the number of owners. Owners share the profits. Owner liability is limited to investment.

Complete the chart using your textbook Pages

Proprietorship AdvantagesDisadvantages ●Owner makes all decisions ●Profits belong to owner ●Job satisfaction/succ ess ●Responsible for all debt ●Difficult to expand ●Responsibilities can become more difficult

Partnership AdvantagesDisadvantages ●Two or more make decisions ●Two or more share risks ●Two or more share profits ●Can make more money ●May have conflicts with partner ●Difficult to expand ●Personal liability ●Share profits

Corporation AdvantagesDisadvantages ●Can raise more money ●Stockholders not responsible for debt ●More difficult and expensive to start ●Limited by government regulations

D. The Role of Entrepreneurs: Entrepreneurs are innovators who drive technology and change by: Taking risks to produce/sell goods in search of profits Starting new businesses, creating new products/ideas, and creating innovative management plans. May establish a business according to any of the three types of organizational structures (business)

Circular Flow “What comes around goes around.” The economic system can be compared to the water cycle in science. Resources, goods and services and money flow around and around, fueling our economy. Government

II. Economic flow: (circular flow) –money flows in a cycle between individuals, businesses, and the government Money Goods and Services Resources

Saving and Investing money by Individual and business give banks financial capital that can be borrowed for business expansion or production or increased consumption by consumers (personal loans) Money is deposited in the bank. Then the money is loaned to other people. They spend the money or use it to start new businesses.

Individuals (households) own the resources used in production, they sell the resources to businesses, or work for the businesses. In return they get income used to purchase products. People sell their property, labor, and ideas. They use the money earned to buy things they want.

Businesses (producers) buy resources to make products sold to individuals, other businesses, and the government. They use the profits to buy more resources. Businesses make things to sell. They use the money they earn to buy resources to make more things to sell.

B. Governments use tax revenue from individuals and businesses to provide public goods and services. The government collects taxes. They use the money to build roads and schools, and to pay police and firefighters.

Types of Financial Institutions Banks Savings and Loans Credit Unions Securities Brokerages

Financial institutions act as intermediaries between savers and borrowers. Banks receive deposits-- --and make loans. Deposits = money in Loans = money out

A. Interest- payments received when you allow someone to use your money, or what you pay when you want to use someone else’s money

B. Private Financial Institutions- include banks, savings & loans, and credit unions Offer savers a place to keep their money and spenders a place to borrow Receive deposits from savers to pay them interest to keep and use their money They make loans to people who need money and charge them interest. Encourage saving and investing by paying interest on deposits

Deposits- when you put money into a financial institution Withdrawal-when you take money out of a financial institution