Changing Forms of Business

The Rise of the Corporation


Day 1 Warmup (below)

Day 2 Warmup (follow this link the 2nd day of this activity)


Use the information in the chart below to complete your graphic organizer.

 

Changing Forms of Business
  Early 1800's
Late 1800's
FORM
Small company or business
Corporation
OWNERSHIP
One individual, a family, or a few partners
Stockholders
EXPENSES
From the pockets of the owner(s)
Met by selling shares of the
corporation to investors
PROFITS
Belong to the owner(s)
Shared by the stockholders
PRODUCTION
Usually small due to few workers
Large
MARKET
Usually limited to nearby area
National / global (worldwide)


Read the information below. Use to answer the questions on the back of your graphic organizer.

Corporations: Businesses with Many Owners

Building a railroad, a steel mill, an oil refinery, or a factory is an expensive undertaking. Usually one person would not have enough money to start such a business on his or her own. Because of this a new way of doing business became common in the late 1800's. These new businesses were called corporations.

A corporation is a business that is owned by many people. It is started by someone who has the idea for the business. That person then sells shares of the business to other people. The shares are called stock. The stock is sold to raise money. The more shares of stock the person sells, the more money he or she can raise. That money is used to build the business.

The people who buy shares in the business are called stockholders. It is the stockholders who actually own the business. Those who own many shares of stock own more of the business than those who own few shares. When the corporation makes a profit, that money is divided among the stockholders. Those who own a greater percentage of the stock get a greater percentage of the profit.

In order for a corporation to be successful it has to produce a product or provide a service that other people want to buy. If this happens, the corporation will make a profit. The price of that corporation's stock will then usually go up, because more people will want to buy it. Demand for the stock will be greater than supply of the stock, so the price will rise. On the other hand, if business is bad, the price of the stock will go down, because fewer people will want it. The supply of the stock will be greater than the demand for the stock, so the price will fall.

Investors who buy a corporation's stock are taking a risk. They gamble that the price of the stock will go up. If they can sell the stock for more than they paid for it, they make money. If the value of the stock falls to a price lower than they paid for it, they lose money.



Read More About It!