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
stock
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
0%
B
A
0%
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
0%
B
A
0%
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
A. A
B. B
0%
B
0%
A
B. No
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
0%
A
A.
B.
C.
0%
D.
B
A
B
C
0%
D
C
0%
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
0%
B
A
0%
Organized Labor
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
0%
A
A.
B.
C.
0%
D.
B
A
B
C
0%
D
C
0%
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
0%
A
A.
B.
C.
0%
D.
B
A
B
C
0%
D
C
0%
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
0%
A
A.
B.
C.
0%
D.
B
A
B
C
0%
D
C
0%
D
Roles of Business
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
0%
B
A
0%
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
0%
B
A
0%
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 and
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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