business and labor
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Business and Labor. Chapter 22. Types of Businesses. Sole proprietorship Most common form of business organization Business owned and operated by a single person Easiest form of business to set up Advantages Owner receives all profits - PowerPoint PPT PresentationTRANSCRIPT
Business and LaborChapter 22
Types of Businesses1. Sole proprietorship Most common form of business organization Business owned and operated by a single
person Easiest form of business to set up Advantages
Owner receives all profits Decisions on how to run the business can be
made quickly Disadvantages
Owner responsible for all problems related to business
Owner has unlimited liability, all personal assets of owner may be seized to pay debts
Hard to raise financial capital Difficult to attract qualified employees, can’t
offer fringe benefits (insurance, sick leave, etc.)
Types of Businesses
Partnerships Owned by two or more people Business partners bound by articles of partnership
Determine how much each member will contribute, what role each person has
How profits will be shared How partners will be added or removed
Advantages Multiple owners can raise more money Owners do not pay corporate income tax Each owner brings certain skills to help the business
Disadvantages Legal structure is complex Owners have unlimited liability
Types of Businesses3. Corporations Has many of the rights and responsibilities
of an individual Can do anything a person can do (own
property, pay taxes, get sued) except vote 20% of all businesses are corporations Charter is a government document that
grants them permission to organize Specifies amount of stock that will be issued Stockholders become owners of the
corporation Money received from selling stock is used to
set up and run company Stockholders elect a board of directors to
act on their behalf Board hires managers to run the company
on a daily basis
Types of Businesses
Advantages Easy to raise financial capital (sell shares of stock) Ability to raise capital allows corporations to grow huge Many have economies larger than some countries Board of directors can hire managers to run company and replace them if they fail Ownership can be easily transferred by selling stock Corporations have limited liability, if company fails individuals not liable for
companies debts Disadvantages
Expensive and complex to set up Owners have little say in business because of stockholders Subject to more regulation by government Have to release financial reports to keep shareholders informed of business Stockholders subject to double taxation (taxes on corporation and on
shareholder earnings
Types of Businesses Other types of business
organizations Non-profits
Uses surplus funds to promote interests of members (hospitals, churches and social service agencies)
Earnings not distributed to owners Exempt from income and property
taxation Cooperatives
Voluntary organization that is formed for economic activity
Buy bulk goods on behalf of members Farmers Cooperatives members sell
crops directly to central markets
Corporations, Mergers and Multinationals
Corporate Combinations Companies combine with other companies to create larger more
efficient firms Can sell goods at a lower priceThree types of mergers Horizontal Merger
Two or more companies that compete in the same market and provide the same good or service
Try to improve efficiency, reduce costs and boost revenue Monitored closely by the federal government so they do not create a
monopoly Vertical Merger
Companies involved in different stages of producing good or service New firm can control all phases of production Typically do not lessen competition
Conglomerate Buy companies that produce unrelated goods Have more that three businesses that produce unrelated products One business earns a majority of the firms profits
Corporations, Mergers and Multinationals
Multinational Corporations Produce goods throughout the world Operate in more than one country at a time Must obey laws and pay taxes in all countries where
they operate Many have operating budgets bigger than most
governments Advantages
Provide jobs Spread technology Help poorer nations improve their standard of living
Disadvantages Have too much influence over culture and politics in
countries where they operate Working conditions are poor
Other OrganizationsBusiness franchise Semi independent business that
pays fees to parent company In return it has the exclusive
right to sell a certain product in a given area
Franchiser (parent company) develops products and works with local franchise to produce and sell product Allows owners a degree of
control and owners benefit from support of parent company
Other OrganizationsAdvantagesA. Come with a built in reputationB. Management and training supportC. Standardized quality
owners follow certain rules and processes to guarantee product qualityD. National advertising E. Financial assistanceF. Centralized buying power
buy materials in bulk to keep costs downDisadvantagesG. High franchising fees and royalties
Royalties are a share of earningsB. Strict operating standards
Must follow all rules in the franchise agreementC. Purchasing restrictionsD. Limited product line
can only sell approved products
Labor Unions Labor unions are groups of workers who band together to gain
better pay and working conditions 14% of American workers belong to a union Two types of unions Trade unions- all workers perform the same skill (craft union) Industrial unions- all workers in the same industry
Labor Unions Organized labor operates at three levels-
local, national and the federation Local- members of a factory, company or
geographic area Deals with a company negotiating a
contract and monitors the terms of a contract
National unions help set up local unions and to negotiate contracts between local unions and companies Provides lawyers and staff to negotiate
contracts for the entire industry Federation level- AFL-CIO is a union
that represents 13 million workers worldwide
Labor Unions Some criticize unions for trying to control the labor supply Some unions support the closed shop where a worker had to
be a union member to be hired 1947 Taft-Hartley Act closed shops became illegal in any
company that participated in interstate commerce More common now is the union shop
Companies hire nonunion workers but they must join the union to begin working
Taft Hartley allows states to ban this activity These states are called right to work states that prevent unions
from forcing workers to join unions Modified union shops workers can join union if they want to,
but are not required to join Union can’t be brought into a workplace unless a majority of
workers vote for it National Labor Relations Board oversees union activity
Labor Unions Union carries out collective bargaining
Officials from union and company meet to discuss terms of worker contacts (hours worked, wages, benefits)
When two parties can’t agree they try mediation Third party comes in to help both sides reach an
agreement Some cases workers choose arbitration
Where third party decides how to settle the disagreement Both parties agree in advance to accept what arbitrator
decides Unions and management use different tools to try to
get other side to accept agreement Workers can strike where all union workers refuse to
work Unions can encourage the public to boycott the
business’ products Companies can lockout workers until they meet their
terms
Business in Our EconomySection 3
Business in Our Economy
Businesses play many different roles in our economy Consumers- purchase goods and
services from other businesses (raw materials, office supplies, etc.)
Employers- provide jobs and pay workers
Producers- produce a wide variety of goods and services for consumption
Business in Our EconomyResponsibilities of Businesses1. Responsibility to consumers
to make sure products are safe To advertise truthfully If they do not follow these rules government can step in and
regulate the industry or pull the products from the market2. Responsibilities to owners (and stockholders)
Especially important for corporations To protect shareholders corporations release financial
information regularly One purpose of transparency is to provide investors with
information to see if investment is worth the risk Government can step in if companies are not honest
Business in Our Economy
3. Responsibility to employees Give workers a safe workplace Treat workers fairly without discrimination 1990 Americans with Disabilities Act
keeps employees from discriminating on the basis of mental or physical disabilities
4. Responsibilities to the Community Many businesses feel they have a social
responsibility to pursue goals that benefit society as well as themselves
Many companies give money to charities or take an active role in their community