AEM 2200 Lecture Notes - Lecture 3: Sole Proprietorship, Moral Hazard, Profit Motive
10 Sep 2016
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Document Summary
Sole proprietorship - a business owned and managed by one person. Partnership - a legal form of business with two or more owners. Corporation - a legal entity with the authority to act and have liability separate from its owners. Franchise - the right to use a specific business"s name and sell its products or services in a given territory. Cooperatives - a business owned and controlled by the people who use it producers, consumers, or workers with similar needs who pool their resources for mutual gain. Potential conflicts of interest between principals (e. g. , shareholders/stakeholders) and agents (managers, especially top executives) Moral hazard - occurs when a party insulated from risk behaves differently than it would behave if it were fully exposed to the risk. Conflict of interest - occurs when an individual is involved in multiple interests, one of which could possibly corrupt the motivation for an act in the other.
