Wednesday, January 30, 2013

Big Business

Most businesses were small partnerships before the Civil War, but by 1900, larger businesses began to take over the economy. Corporations are what made this possible, organizations owned by many people, but treated as one person. The corporations were able to make contracts, sue people, be sued, own property, and pay taxes, just like an actual person. The corporation owners own stocks in the business, and are so called stockholders. this system allowed the corporation to make money, and the financial risk was divided between more people.

There are two types of costs which businesses have to pay, fixed costs and operating costs. the corporations have to pay the fixed costs no matter whether it is operating or not, and operating costs are only paid when the business is in operation. These wages are similar to the ones that small businesses had to pay, but the were opposites, the Fixed cost of a small business is small while the operating costs were high, making it less expensive to close down a small business, while big businesses had higher fixed costs and lower Operating costs, almost making them recession-proof. This advantage made the bigger businesses more efficient, while small businesses were slowly pushed out.

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