Chapter Introduction Section 1 Types of Businesses Section

Chapter Introduction Section 1: Types of Businesses Section 2: The American Labor Force Section 3: Businesses in Our Economy Visual Summary

Businesses and labor organizations play a major role in our nation and communities. They work separately, as well as together, to make people’s lives better by keeping the economy as healthy as possible.

Section 1: Types of Businesses Market economies rest upon the fundamental principle of individual freedom for consumers, producers, and workers. The three basic types of business organizations in the United States are sole proprietorship, partnership, and corporation.

Section 2: The American Labor Force Market economies rest upon the fundamental principle of individual freedom for consumers, producers, and workers. Labor unions represent about 14 percent of U. S. workers and play an important role in the nation’s economy and political life. They negotiate wages and workplace agreements with management.

Section 3: Businesses in Our Economy Market economies rest upon the fundamental principle of individual freedom for consumers, producers, and workers. Businesses play many different roles in our economy, including that of consumer, employer, and producer. Businesses also have responsibilities to their consumers, owners, employees, and communities.

Guide to Reading Big Idea Market economies rest upon the fundamental principle of individual freedom for consumers, producers, and workers.

Guide to Reading Content Vocabulary • sole • proprietorship • • financial • capital • • partnership • articles of partnership • corporation charter stockholder board of directors • cooperative

Guide to Reading Academic Vocabulary • sole • consult • clarify

Should businesses enjoy all the same freedoms that private citizens do? A. Yes B. No A. A B. B

Proprietorships The most common, and simplest, form of business organization in the United States is the sole proprietorship.

Proprietorships (cont. ) • Sole proprietorships are the simplest and most common form of American business. • Advantages: – Easy to start – Quick decisions without the need to consult a boss or partner – No corporate taxes

Proprietorships (cont. ) • Disadvantages: – Unlimited liability – Difficult to raise financial capital – Difficult to find good employees Forms of Business Organization

Do you think it would be easy and fun to run your own business? A. Yes B. No A. A B. B

Partnerships A partnership is a business owned by two or more people.

Partnerships (cont. ) • A partnership is a business run jointly by two or more owners. • Articles of partnership used to clarify business setup

Partnerships (cont. ) • Advantages: – Easier to raise money – Add partners if needed – No corporate taxes – Partners bring unique talents

Partnerships (cont. ) • Disadvantages: – Complex legal structure – Unlimited liability

Do you think partners should be financially responsible if a customer is injured while being careless at their business? A. Yes B. No A. A B. B

Corporations The corporation is a business recognized by law and is the most complicated of the three main types of businesses.

Corporations (cont. ) • A corporation has many of the rights and responsibilities as an individual. – One-fifth of all businesses – Need a charter to establish – Can sell stock Corporate Chain of Command

Corporations (cont. ) • Stockholders elect board of directors. • Managers actually run business

Corporations (cont. ) • Advantages: – Easy to raise funds – Can grow to be huge – Can hire professional managers – Limited liability

Corporations (cont. ) • Disadvantages: – Expensive to start – Owners have little control – More government regulation – Double taxation

Corporations (cont. ) • Some organizations are nonprofit: – Churches – Hospitals – Social services – Cooperatives or voluntary associations

Which business do you think would best be set up as a corporation? A. Beauty parlor B. Doctor’s office C. Sandwich shop D. Skating rink A. B. C. D. A B C D

Guide to Reading Big Idea Market economies rest upon the fundamental principle of individual freedom for consumers, producers, and workers.

Guide to Reading Content Vocabulary • labor union • mediation • right-to-work law • arbitration • collective bargaining • strike • boycott Academic Vocabulary • comprise • technique • option

Are labor unions good for American business? A. Yes B. No A. A B. B

Organized Labor unions play an important role in the nation’s economy and political life.

Organized Labor (cont. ) • Labor unions help workers obtain better pay and working conditions. • Only 14% of U. S. workers are in unions. Right-to-Work States

Organized Labor (cont. ) • Two types of unions: – Craft or trade unions – Industrial unions

Organized Labor (cont. ) • Different levels of union organization: – Local union – National union • Federation – American Federation of Labor-Congress of Industrial Organizations (AFL-CIO)

Organized Labor (cont. ) • Union arrangements: – Closed shops now illegal, but once common – Union shops require employees to join union after being hired – Modified union shop gives hirees a choice

Organized Labor (cont. ) – Twenty-two states have right-to-work laws – National Labor Relations Board (NLRB) regulates

If you were hired by a business that had a modified union shop, would you join the union? A. Yes B. No C. Probably D. Probably not A. B. C. D. A B C D

Negotiations Labor and management negotiate workplace agreements.

Negotiations (cont. ) • Unions engage in collective bargaining for their members. • Negotiations focus on: – Wages – Health care – Holidays – Working conditions – Procedures for changing rules

Negotiations (cont. ) • Options for coming to agreement: – Mediation – Arbitration

Negotiations (cont. ) • Labor tools: – Strike so business has to shut down or give in – Encourage public to boycott until business changes Labor Union Trends

Negotiations (cont. ) • Management tools: – Lockout workers until they accept new contract • Government may step in under extreme circumstances. • Public employees may also join labor unions.

Which seems like the most effective method for a business and a union to come to an agreement? A. Strike B. Lockout C. Mediation D. Arbitration A. B. C. D. A B C D

Guide to Reading Big Idea Market economies rest upon the fundamental principle of individual freedom for consumers, producers, and workers.

Guide to Reading Content Vocabulary • transparency • discrimination • social responsibility Academic Vocabulary • foundation • crucial • reveal

What is a business’ first responsibility to? A. its owners B. its employees C. the community D. its customers A. B. C. D. A B C D

Roles of Businesses play many different roles in our economy. Businesses also have many responsibilities.

Roles of Business (cont. ) • Businesses do more than produce goods or services. • Other roles in economy: – Consumer – Employer – Donor, often through foundation

Do you know of any companies in your city that do community service? A. Yes B. No A. A B. B

Responsibilities Businesses have responsibilities to their consumers, owners, employees, and communities.

Responsibilities (cont. ) • Responsibilities to consumers: – Safety – Honesty – Fairness – Government enforces

Responsibilities (cont. ) • Responsibilities to owners: – Transparency or full financial disclosure

Responsibilities (cont. ) • Responsibilities to employees: – Safety – No discrimination

Responsibilities (cont. ) • Responsibility to community: – Social responsibility, such as gifts to charity – Volunteer programs – Support education – Disaster relief – Public environmental awareness

Do you agree that businesses should have social responsibility? A. Agree B. Disagree A. A B. B

Business • Sole proprietorships are small, easy-to-manage enterprises owned by one person. • Proprietorships are relatively numerous and profitable. • Disadvantages include raising financial capital and attracting qualified employees. • Partnerships are owned by two or more persons. • Corporations are owned by shareholders.

Business • One of the major advantages of a corporation is limited liability. • A major disadvantage of corporations is that they are taxed more heavily than other forms of business organizations.

Responsibilities • Businesses have a responsibility to provide safe, working products to their customers. • Businesses have an obligation to pursue goals that benefit society as a whole as well as themselves.

Labor • For much of its history, organized labor in the United States has been split into two groups: craft unions and industrial unions

Labor • Organized labor operates at three levels: • local union • national union • federation • The closed shop (now illegal) required that employers hire only union members.

Collective Bargaining • Collective bargaining is the process by which unions and employers negotiate the conditions of employment. • When collective bargaining fails, several other methods are available to settle labor disputes.

sole proprietorship  a business owned and operated by a single person

financial capital  money used to buy the tools and equipment used in production

partnership  a business owned by two or more people

articles of partnership  formal legal papers specifying the arrangement between partners

corporation  type of business organization owned by many people but treated by law as though it were a person

charter  a written document granting land the authority to set up colonial governments; or a government document granting permission to organize a corporation

stock  ownership share of a corporation

stockholder  an individual who has invested in a corporation and owns some of its stock

board of directors  people elected by the shareholders of a corporation to act on their behalf

cooperative  a voluntary association of people formed to carry on some kind of economic activity that will benefit its members

sole  being the only one

consult  to seek information or advice from a person or resource

clarify  to make something more understandable

labor union  association of workers organized to improve wages and working conditions

right-to-work laws  state laws forbidding unions from forcing workers to join

collective bargaining  process by which unions and employers negotiate the conditions of employment

mediation  situation in which union and company officials bring in a third party to try to help them reach an agreement

arbitration  situation in which union and company officials submit the issues they cannot agree on to a third party for a final decision

strike  when workers deliberately stop working in order to force an employer to give in to their demands

boycott  the refusal to purchase certain goods

comprise  to consist or be made up of

technique  procedures or methods by which something is done

option  an alternative or choice

transparency  process of making business deals more visible to everyone

discrimination  unfair treatment based on prejudice against a certain group

social responsibility  the obligation a business has to pursue goals that benefit society as well as themselves

foundation  the basis or groundwork of a structure or idea; an organization

crucial  of vital importance

reveal  to make known or show plainly

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