Chapter 22
Business and
Labor
Types of Businesses
1.
2.
3.
Sole Proprietorships
Partnerships
Corporations
Sole Proprietorship

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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

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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


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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:
 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

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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
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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

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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

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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

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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
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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
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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
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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.
How do you settle a
labor dispute?

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?

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

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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

4 Responsibilities of
Businesses

To owners:
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pertains to stockholders
transparency -- report all
activities so stockholders can make
smart business decisions
4 Responsibilities of
Business

To employees:
provide a safe workplace
 treat workers with respect
 No discrimination

4 Responsibilities of
Business

To the community:
charity work / donations
 donate many products to help needy
causes
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