Chapter 22 Business and Labor Types of Businesses

Chapter 22 Business and Labor

Types of Businesses 1. 2. 3. Sole Proprietorships Partnerships Corporations

Sole Proprietorship n n 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 n n n Distribution of profits: Owner keeps all the profits Responsibility of debts: Unlimited liability-personal property may be taken to pay debts Life of business: Limited life-ends with death or retirement of owner

Sole Proprietorship n n n Taxes: Single taxation-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: n Own boss n Keep all profits n Make all decisions n Own schedule

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

Partnerships n n n Number of owners: 2 or more Structure: Must draw up an Articles of Partnership 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 n n n 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 n n 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 n n 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: n Raise more $ than by yourself n share responsibilities n add special talents n larger than proprietorships

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

Corporations n n 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 n n 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 n n Distribution of profits: Stockholders share profits through dividend checks(% of profits based on % of stock) Responsibility of debt: Limited liability - only lose what you paid for the stocks, your personal property can't be touched

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

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

Business and Labor How are working conditions set and negotiated?

Why are labor unions formed? n 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 n n 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 n n n 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 n shop? You must be a member of the union before you can be hired by that company

What is a union n 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? n 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? n 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.

How do you settle a labor dispute? n Arbitration: Similar to mediation, accept in arbitration both sides agree before to follow the arbitrators decision no matter what.

What tactics are used by the union? n 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? n 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 n n n 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 n To consumers: sell us safe products n products are to work as they are promised n truthful in their advertising n should treat customers fairly n

4 Responsibilities of Businesses n To owners: n n pertains to stockholders transparency -- report all activities so stockholders can make smart business decisions

4 Responsibilities of Business n To employees: provide a safe workplace n treat workers with respect n No discrimination n

4 Responsibilities of Business n To the community: charity work / donations n donate many products to help needy causes n