Business and Labor
Chapter 22
Types of Businesses
Section 1
Types of Businesses
•
The types of business organizations in
the economy today:
1. Sole proprietorship (most common)
2. The partnership
3. Corporation
Proprietorships
• A business owned and operated by a sole,
or single person.
• Examples: Beauty salons, cleaners, and
pizza restaurants.
• Mowing or babysitting for someone else.
Advantages and Disadvantages
• Advantage: the proprietor has full pride in
owning the business and receives all the
profits.
• Disadvantage: The proprietor has
unlimited liability, or complete legal
responsibility for all debts and damages
arising from doing business.
More Disadvantages
• Financial Capital—The money needed to
run a business or enable it to grow larger.
– Sole proprietors find it difficult to raise this.
• Difficult to attract qualified employees
Partnerships
• Partnerships= A business that two or
more people own and operate.
• Articles of Partnership= A document that
identifies how much money each partner
will contribute and what role each partner
will play in the business.
– How will you share profits and losses.
Kinds of Partnerships
• General Partnerships
– All partners are responsible for the
management and financial obligations of the
business.
• Limited Partnerships
– At least one partner is not active in the daily
running of the business, although he or she
may have contributed funds to finance the
operation.
Advantages
•
•
•
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Pride of owning a business
Partnerships can raise money
Each owner brings special talent.
Larger size make for more efficient
operations.
Disadvantages
• Legal structure is complex.
• Owners have unlimited liability.
Corporations
• Corporation= An
organized business
recognized by law that
has many of the rights
and responsibilities of an
individual.
Structure of a Corporation
• Someone who wants to start a corporation
must get a charter—a government
document granting permission to organize.
– Includes the name, purpose, address, ect.
• Charter specifies the amount of stock, or
ownership shares of the corporation, that
will be issued.
– The people who buy this stock are called
Stockholders
– Use this money to set up and run the
business.
Structure of a Corporation
• The stockholders elect a board of
directors.
• The board hires a manager to run the
corporation on a daily basis.
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Advantages
• Ease of raising financial capital
• Ease of raising capital to expand the
corporation.
• Board of directors can hire professional
managers to run the business.
• Ownership can be easily transferred.
Disadvantages
• Expensive and complex to set up
• Business owners have very little say in the
management of the business.
• Subject to more government regulation
– Release reports
• Subject to double taxation
– Tax on profits
– Then when those profits are distributed to the
stockholders, the stockholders have to pay
taxes on those earnings.
The Largest Corporations
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Wal-Mart is the worlds largest corporation
BP
Exxon Mobile
Shell
Other Business Organizations
• Nonprofit institutions
– Churches and hospitals.
• Cooperative—a voluntary association of
people formed to carry on an economic
activity that benefits its members.
The American Labor Force
Section 2
Organized Labor
• Labor Unions= groups of workers who
band together to have a better chance to
obtain higher pay and better working
conditions.
– Only 14% of American workers belong to
unions.
– Ex. United Auto Workers
Types of Unions
• Local Unions
– Includes the members of a
union in a factory, company, or
geographic area.
• National Unions
– Individual craft or industrial
unions that represent locals on
a nationwide level.
– AFL-CIO (13 million members)
Union Arrangements
• Union shop—a common agreement today
which allows companies to hire anyone as
long as they join the union shortly after
they begin working.
• Right-to-work laws—prevent mandatory
union membership required by the union
shop.
– This does not require a worker to join a union
to be hired or keep the job.
Union Agreements
• A union cannot be brought into a
workplace unless a majority of the workers
votes in favor of it.
• National Labor Relations Board (NLRB),
makes sure that these union elections are
carried out fairly and honestly.
Negotiations
• Collective Bargaining—Officials from the
union and the company meet to discuss
the workers new contract.
– Focus on wages and benefits
Getting Outside Help
• If the parties cannot agree on terms for a
new contract they can:
– Try mediation—they bring in a third party
who tries to help them reach a compromise
agreement.
– Try arbitration—A third party listens to both
sides, then decides how to settle the
disagreement.
• Both parties agree in advance to accept the
arbitrator’s decision.
Labor Tools
• Works can all a strike—in which all
workers in the union refuse to go to work.
– The workers hope the business will have to
shut down without any employees, forcing the
company to accept the union’s contract terms.
• Encourage a boycott—refuse to buy the
business’s products.
Strikes
Management Tools
• Lockout
– The company prevents workers from entering
the building until they accept the contract.
– The business hopes the loss of income will
convince workers to accept the company’s
position.
Injunctions
• Management sometimes requests a court
injunction—a legal order of a court
preventing some activity
– Used to prevent strikes
– 1995 baseball strike
Seizure
• A temporary government takeover of
operations to allow the government to
negotiate with the union.
• Coal strike in 1946.
Public Employee Union
• A public employee union is a union for the
local, state, or federal government.
• The American Federation of Government
Employees (AFGE) is the largest
representing 600,000 workers.
Businesses in Our Economy
Section 3
Roles of Business
• Many local businesses and corporations
support charities and give money to
foundations.
• Businesses act as consumers—they buy
goods and services from other
businesses.
• Businesses are Producers!
Responsibilities to Consumers
• Responsibility of selling products that are
safe.
• Products should work as promised.
Responsibilities to Owners
• To protect stockholders, corporations are
required to release important financial
information regularly.
• This is called transparency!
– Provide investors full disclosure before they
choose to invest, or continue to invest, in the
company.
– ENRON!
Responsibilities to Employees
• Businesses are required to give their
workers a safe workplace and to treat all
workers fairly and without discrimination.
– They can not treat employees differently on
the basis of race, religion, color, gender, age,
or disability.
Responsibility to the Community
• Social Responsibility= The obligation to
pursue goals that benefit society as well
as themselves.
– Gifts to charities