Chapter 22

Business and Labor

Types of Businesses

1. Sole Proprietorships2. Partnerships3. Corporations

Sole Proprietorship

Number of Owners:1 Structure: Only limited by the

imagination of the owner Getting started: No special

requirements Who makes decisions: Owner

makes all key business decisions

Sole Proprietorship

Distribution of profits: Owner keeps all the profits

Responsibility of debts: Unlimited Unlimited liabilityliability-personal property may be taken to pay debts

Life of business: Limited life-ends with death or retirement of owner

Sole Proprietorship Taxes: SingleSingle taxationtaxation-taxed as

individual income. Business itself is not taxed

Ability to raise money: Capital is limited to amount owner can raise through loans or personal savings

Ability to sell business: very difficult to find suitable buyer

Sole Proprietorships

Advantages: Own boss Keep all profits Make all decisions Own schedule

Sole Proprietorships

Disadvantages: Unlimited liability Hard to raise capital Do all the work Can’t keep the best workers

Partnerships

Number of owners: 2 or more Structure: Must draw up an Articles Articles

ofof PartnershipPartnership that puts in writing all responsibilities and duties

Getting started: Partners must agree on all parameters of the business and put into the Articles of Partners

Partnerships Who manages the business

(making decisions): Partners must share all decision making

Distribution of profits: Partners split the profits based on the Articles of Partnership

Responsibility of debt: Unlimited liability that is shared by both partners. One partners debt is the others

Partnerships

Life of the business: Limited life, ends with death or retirement of one of the owners

Taxes: Single taxation with both partners paying taxes on their share of the business’ profits

Partnerships

Ability to raise money: Limited to the amount that the partners can bring from their own accounts or from loans they can get

Ability to sell business: Very difficult to sell, especially if only one partner wants to sell

Partnerships

Advantages: Raise more $ than by yourself share responsibilities add special talents larger than proprietorships

Partnerships

Disadvantages: Complex legal structure Have to share decision making Have to share profits Unlimited liability of both you and

your partner

Corporations Number of owners: Any number,

ownership is divided into parts called shares. Ownership of shares are called stocks

Structure: After gaining a charter from the state government, stocks (shares of ownership) are sold and a Board of Directors is chosen to run day to day operations

Corporations

Getting started: Must obtain a charter from the state government, then the sale of stocks may begin. This allows for the infrastructure to now be bought

Who manages the business: The Board of Directors make general decision that are carried out by lower level managers

Corporations

Distribution of profits: Stockholders share profits through dividend checks(% of profits based on % of stock)

Responsibility of debt: Limited Limited liability-liability- only lose what you paid for the stocks, your personal property can't be touched

Corporations Life of business: Unlimited life-continues on

as long as company is profitable Taxes: Double taxation-Corporate profits

are taxed as are stockholders dividend check

Ability to raise capital: Can always sell more stock to raise large amounts of money

Ability to sell business: Anyone can buy stock

Corporations

Advantages: Ease of raising capital ease of getting loans large size can hire best workers ownership easily transferred limited liability

Corporations

Disadvantages: Expensive and difficult to start Owners have little say in decisions More government regulation Double taxation

Business and Labor

How are working conditions set and negotiated?

Why are labor unions formed?

To get better wages and working conditions by joining together to get the attention of the management of a company (strength in numbers)

2 Types of Unions

Craft or Trade Unions: workers who all perform the same type of skill EX: plumbers

Industrial Unions: workers in the same industry EX: auto workers

Levels of Labor Unions local-deal with making sure all contracts

are honored and takes the lead in contract negotiations

national-provide support services for the local unions including lawyers and other trained negotiators. They may also negotiate a contract for all the workers across the county in that particular industry

federation-represent workers in multiple fields EX: AFL-CIO which represents 13 million workers across the nation

What is a closed shop?

You must be a member of the union before you can be hired by that company

What is a union shop?

Companies can hire non-union workers, but they must join the union after being hired

What is a right-to work law?

Any law that bans companies from forcing workers to join a

union.

What is a

modified union shop?

Workers don’t have to join the union, but they may if they want to.

What is the role of collective bargaining?

To have the union negotiate the wages and working conditions for all of it’s workers with the company. This contact usually lasts for a set period of time after which new negotiations are held. (strength in numbers)

How do you settle a labor dispute?

Mediation: When the union and management can’t agree they may bring in a mediator to settle the dispute. The mediator listens to both sides and makes a suggestion. Neither side has to listen to this suggestion, but it may help settle the dispute.

Arbitration: Similar to mediation, accept in arbitration both sides agree before to follow the arbitrators decision no matter what.

How do you settle a labor dispute?

What tactics are used by the union?

Strike: When workers refuse to go to work until a labor dispute is settled. It is used to hurt the profit margin of the company, until they meet the workers demands

What tactics are used by business owners?

Lockout: This is when the company locks it’s doors and refuses to pay its workers until the labor dispute is settled. The business hopes the loss of income will force the workers to cave in.

Business and the Community

Roles and Responsibilities

3 Roles of Businesses

Consumers: they buy products and raw materials from other businesses

Employers: without them wages could not be earned

Producers: giving us all the things we need to satisfy our wants and needs

4 Responsibilities of Businesses

To consumers: sell us safe products products are to work as they are

promised truthful in their advertising should treat customers fairly

To owners: pertains to stockholders transparency -- report all

activities so stockholders can make smart business decisions

4 Responsibilities of Businesses

4 Responsibilities of Business

To employees: provide a safe workplace treat workers with respect No discrimination

To the community: charity work / donations donate many products to help

needy causes

4 Responsibilities of Business