Business and the Economy Chapter 22

3 types of businesses Sole proprietorships Partnerships Corporations

Sole Proprietorships A business owned and operated by a single person. Advantages: They are easy to set up and the owner gets all the profit. One person being responsible for the company allows flexiblility. Disadvantages: They have unlimited liability. If anything goes wrong, the proprietor is responsible. Money must be provided by the proprietor. Proprietorships may have labor problems because people may be more likely to go to a larger company.

Partnership IT is a business owned by two or more people. Advantage: Because there are multiple owners, they usually take in more money than a proprietorship. Disadvantage: They are usually legally complex. They have unlimited liability. Each owner is fully financially responsible.

Corporation It is a business recognized by law that has many rights and responsibilities that people have. Advantages: They can easily raise capital (money) and borrow $. They have limited liability which means that the owners are not responsible for debt. Disadvantages: They are expensive and complex to set up. The business owners have very litle to say about management. They face more government regulations. They have to deal with double taxation and pay taxes on profits twice.

LABOR Labor unions are organizations that seeks to increase the wages and improve the working conditions of it’s members. 2 TYPES: - Trade (craft) Union – workers who perform the same trade - Industrial Unions – different workers who belong to the same industry.

Purpose of Labor Unions To negotiate contracts on behalf of workers and represent their interests with management. Management and Unions often don’t agree and so Negotiation – bargain for contract issues Mediation – an outside party tries to help settle differences Arbitration – 3rd party listens to both sides and tries to reach an agreement Strikes – workers refuse to work Lock outs – management locks workers out until they agree to the contract

Role of Business Consumers – they buy products to run their business. Employers – they employ workers Producers – they produce goods and services

Responsibilities of Business Responsibility to Consumers – To sell products that are safe and do what they are supposed to do. Responsibility to the Owners – Important in Corporations because the managers and owners are not the same person. Responsibility to Employers – Must provide a safe workplace and protect them from discrimination. Responsibility to the Company – They have a social responsibility to pursue the goals that benefit society.