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Sole Proprietorship
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
Distribution of profits: Owner keeps all the profits
Responsibility of debts: Unlimited Unlimited liabilityliability-personal property may be taken to pay debts
Life of business: Limited life-ends with death or retirement of owner
Sole Proprietorship Taxes: SingleSingle taxationtaxation-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
Disadvantages: Unlimited liability Hard to raise capital Do all the work Can’t keep the best workers
Partnerships
Number of owners: 2 or more Structure: Must draw up an Articles Articles
ofof PartnershipPartnership 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 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 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
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
Distribution of profits: Stockholders share profits through dividend checks(% of profits based on % of stock)
Responsibility of debt: Limited Limited liability-liability- only lose what you paid for the stocks, your personal property can't be touched
Corporations 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
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
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 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 union shop?
Companies can hire non-union workers, but they must join the union after being hired
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.
Arbitration: Similar to mediation, accept in arbitration both sides agree before to follow the arbitrators decision no matter what.
How do you settle a labor dispute?
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.
3 Roles of Businesses
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
To owners: pertains to stockholders transparency -- report all
activities so stockholders can make smart business decisions
4 Responsibilities of Businesses
4 Responsibilities of Business
To employees: provide a safe workplace treat workers with respect No discrimination