Firms

A firm is an organization that employs factors of production to produce goods or services that it hopes to sell at a profit. Its primary goal is usually profit maximization.

A sole trader is a business owned and controlled by one person who receives all the profits but is personally liable for all the debts. A partnership involves two or more people who agree to share in the profits or losses of a business.

A company is a business organization that has its own legal identity separate from its owners (shareholders). It can own assets, borrow money, and enter into contracts in its own name.

Limited liability means the owners (shareholders) are only liable for the debts of the business up to the amount they invested. Unlimited liability means the owners are personally responsible for all the business's debts, even if it requires selling personal assets.

A private limited company's shares are not offered to the general public. Shares are held by a select group of people, often family or friends, and the transfer of shares is restricted.

A public limited company can offer its shares to the general public on the stock exchange. This allows them to raise significant capital, but they face greater regulatory scrutiny and shareholder accountability.

A multinational corporation is a company that operates in more than one country. They often have production facilities or offices in various locations around the world.

A merger is when two or more companies agree to join together to form a single, larger company. A benefit could be increased market share and reduced competition.

Horizontal integration occurs when firms in the same industry and at the same stage of production merge. Vertical integration involves firms at different stages of the production process in the same industry merging; can be forward (closer to consumer) or backward (closer to raw materials).

Conglomerate integration occurs when firms in unrelated industries merge. A common motivation is diversification of business risk across different sectors.