The Rise of Big Business

1. The Rise of Big Business Essential Questions What are the three types of business organization in the United States? What new ways of doing business developed in the late 19th Century? What arguments did critics use against the new business practices of large corporations?

2. Sole Proprietorship • Single owner runs business. Advantages: • Owner is his own boss. • Owner keeps all profits. • All decisions of the business rest with owner. Disadvantages: • Owner must provide all start-up capital. • Owner takes on all risks and all debts. • Owner pays all bills, hires all employees, and works long hours. • Owner can lose everything!

3. Partnership • Two or more people run the business. Advantages: • Start-up capital and skills are combined. • Losses are shared between two people. • Workload and decision-making are shared. Disadvantages: • Death or disagreement among partnership may end business. • If the business fails, each person is responsible for the total loss.

4. Corporation • Business type in which ownership is divided up among many investors. • Corporations sell pieces of ownership, called shares or stock to investors, a.k.a. stockholders. Advantages • Less risky – risk is spread out among many stockholders. • Limited liability – investors can only lose their original investment, nothing more. Disadvantage • Profits are distributed among many owners.

5. Investors offer money (capital) in exchange for shares, or ownership, in the company. 2. Capital to… Mr. O. is dreamy!!! 3. Corporations! 1. Investors provide…

6. 4. Investors receive dividends, or shares of company profits, in exchange for their investment. We want to make money on our investment!

7. We reinvest to expand our business & increase profits! 5. Corporations then reinvest capital to build new factories or hire more employees.

8. Other Forms of Business Organization • Late 1800’s – New forms of business organization emerge. • New Goals: • Eliminate competition. • Dominate particular area of economy.

9. Monopoly • When a company or group of companies has complete control over an industry. • Ex. Standard Oil.

10. Pool • When competing companies in one field agree to divide up business and then fix prices. • Ex. Railroad companies of late 1800’s.

11. Trusts • A group of corporations run by a single board of directors. • Shareholders had no say. • Ex. Standard Oil Trust.

12. Attitudes Toward Business • Laissez-Faire – government should not interfere with a nation’s economy. • Free-Enterprise System – businesses are owned by private citizens. • Owners decide what products to make, how much to make, and where to sell it. • Owners also determine what prices to charge consumers. • Companies compete to win customers by making the best product at the lowest price.

13. Attitudes Toward Business • Social Darwinism – “survival of the fittest.” • Scientific theory drives late 1800’s business. • Strong businesses will thrive; weak businesses will fail. • Government regulation interferes with natural selection.

14. Critics of Corporations • Trusts and monopolies reduce competition. • No competition: prices remain high and products are of low quality. • New companies cannot compete. • Large corporations abuse workers rights. • Feared the influence of “big business” in politics. • Sherman Antitrust Act – banned formation of trusts and monopolies (very weak!).

15. A. stockholders; buy a share in the business 1. Capital 2. Investors B. a share of the profits C. Money invested in corporation 3. Stock D. a share in the business 4. Dividend

16. 1. Entrepreneur 2. Investors 3. Stock 4. Dividend C. Person with a business idea A. stockholders; buy a share in the business D. a share in the business B. a share of the profits