Chapter 6 - The business-investment sector. In this chapter, you will learn to: The three types of business firms, how investment is carried out, the difference between gross investment and net investment, how capital is accumulated, the determinants of the level of investment, the graphing of the C + i line. | Chapter 6 The Business-Investment Sector Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 6-1 Chapter Objectives The three types of business firms How investment is carried out The difference between gross investment and net investment How capital is accumulated The determinants of the level of investment The graphing of the C + I line Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 6-2 Proprietorships, Partnerships, and Corporations Proprietorship Proprietorships are owned by individuals and are almost always a small businesses Grocery stores, barbershops, restaurants, family farms, gas stations, etc Advantages of a proprietorship You can be your own boss Your income is taxed only once Disadvantages of a proprietorship Unlimited liability Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 6-3 Proprietorships, Partnerships, and Corporations (Continued) Partnership Partnerships are owned by two or more people Some law and accounting firms have hundreds of partners Advantages of a partnership It is easier to raise more capital The work and responsibility can be divided Disadvantages Partnerships must be dissolved when one partner dies or wants to leave Unlimited liability 6-4 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Corporation A corporation is a legal person Most corporations are small firms Corporations are owned by the stockholders It is easier to raise money by selling stock Most corporations are not publicly held Proprietorships, Partnerships, and Corporations (Continued) Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 6-5 Corporation Advantages Limited liability Corporations have potential perpetual life Corporations may pay lower federal taxes Disadvantages –You need a lawyer and have to pay a charter fee You have to pay federal (perhaps state) corporate income tax Double taxation Proprietorships, Partnerships, and Corporations (Continued) | Chapter 6 The Business-Investment Sector Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 6-1 Chapter Objectives The three types of business firms How investment is carried out The difference between gross investment and net investment How capital is accumulated The determinants of the level of investment The graphing of the C + I line Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 6-2 Proprietorships, Partnerships, and Corporations Proprietorship Proprietorships are owned by individuals and are almost always a small businesses Grocery stores, barbershops, restaurants, family farms, gas stations, etc Advantages of a proprietorship You can be your own boss Your income is taxed only once Disadvantages of a proprietorship Unlimited liability Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 6-3 Proprietorships, Partnerships, and Corporations (Continued) Partnership Partnerships are owned by two or more people Some law
