This is done by a limited-liability company which is like a partnership in that all profits go to the partners but the partners are limited to their losses as to what they put into the firm. A S corporation has to have 35 or fewer employees. The profits go right to the owners without the double taxation problem, plus the owners have limited liability. When we talk about a capitalistic economy we really mean a mixed economy in that we have markets and also have governments participating in the economy. The following is a list of some important functions provided by the government.
Governments provide the legal and social framework for markets to operate effectively.
The laws the government make in essence is the rules of the game. The government provide services to the economy such like police power government agencies etc. The government tries to keep the economy competitive by preventing firms from becoming monopolies. If a monopoly is to occur then the government will try to regulate it so that consumers are not taken advantage of by monopoly pricing. The government will redistribute income.