Businesses, Workers,and the Law

Tennessee State CLEsDescribe advantages and disadvantages of the basic forms of business ownership (sole proprietorship, partnership, and corporation) and identify variations of basic forms of business ownership (franchise, limited partnership, cooperative, limited liability company, and S corporation).Determine which ownership structure is employed by the selected business and hypothesize why it was selected.Review copies of available partnership agreements, articles of incorporation or franchise contracts, noting characteristics important for successful operation of a given business. (TN Reading 1, 4; TN Writing 4, 9)

How do you thinklaws affect business?

Bell Ringer (YOU DO)

Identify the different kinds of laws that affect businesses.

Describe the different kinds of laws that protect workers on the job.

Explain how tax laws affect business profits. Explain the differences between copyrights,

patents, and trademarks. Describe the different laws that protect workers

on the job. Explain the importance of the National Labor

Relations Act.

Objectives

Government Regulation of Business

Regulations Areas of Law that AffectBusiness Operations

Rules that government agencies issue to implement laws

A lot of time and money spent ensuring compliance, avoiding unwanted liability

1. Corporate law2. Tax law3. Intellectual property

law4. Consumer law5. Commercial law6. Licensing and zoning

law.

Corporate Law

Sole Proprietorship

PartnershipCorporation

YOU DO Word Studies (15 minutes)

Simplest kind of business, easiest to start

Most common form of business organization

Owned and managed by one person

Owner entitled to all assets (property owned by business)

If proprietor has business debts, creditors (those to whom money is owed) have first claims against the assets

Proprietorship

Owner is boss Owner receives all profits Owner personally knows employees and

customers Owner can act quickly in decision making Owner is free from red tape Owner usually pays less income tax than a

corporation

Advantages of Proprietorships

Owner may lack necessary skills and abilities

Owner may lack funds Owner bears all losses Illness or death may close the business

Disadvantages of Proprietorships

Primarily concerned with providing personal services

One that sells merchandise or services on a small scale

Businesses Suited to Being Proprietorships

Owned by two or more people

A clearly written and understood partnership agreement can prevent problems later

Net worth = assets – liabilities

Partnership

Skills and abilities pooled

Sources of capital increased

Credit position improved

Contribution of goodwill

Increased concern in business management

Less tax burden than corporations

Reduction in competition

Retirement from management

Operating economies

Advantages of Partnerships

Unlimited financial liability

Disagreement among partners

Each partner bound by contracts of others

Uncertain life Limited sources of

capital Unsatisfactory

division of profits Difficulty in

withdrawing from partnership

Disadvantages of Partnerships

Restricts the liability of a partner to the amount of the partner’s investment

Not all partners have unlimited financial liability for the partnership debts

Limited Partnerships

Furnish more than one kind of product or service

Selling goods and services to customers Professional services

Businesses Suited to Being Partnerships

Formed under state or federal statures that is authorized to act as a legal person

Exists apart from its owners

Can be taxed and sued like an individual

Owners have limited liability—cannot lose personal resources if corporation fails

Corporations

Offer stockholders limited liability and a share of the profits

Stockholders have no management responsibilities

Can raise money by selling stock Have an easier time getting credit

Advantages of Corporations

Must comply with many more federal and state laws

May pay more taxes

Disadvantages of Corporations

Tax LawTaxes are monies paid

by corporations and individuals and are used to fund government programs and services, such as highways and schools.

Levied against a business’s profits

Most important tax

Income Tax

Levied against the property, buildings, or land owned by a business

Based on an assessed valuation of the building or land

Amount that a piece of property is worth, according to a tax assessor.

Property Tax

Government requires businesses to withhold income taxes from employees’ earnings and send them to the federal government

Managers make important decisions because of taxes, such as relocating

Withholding Federal Taxes

IntellectualProperty Laws

Intellectual property laws protect the inventions and new ideas of business.

The document the federal government issues to inventors and companies that gives them the exclusive right to make, use, and sell their inventions for 17 years

When time is up, others can begin selling

Inventor of each type of new product must apply for another patent

Patents

A word, name, symbol, or slogan a business uses to identify its own goods and set them apart from others.

Once owned, no other company can use it.

Good for 10 years, can renew every additional 10 years

Trademarks

The protection provided to creative work

Literary works, musical compositions, plays, dances, paintings, movies, maps, and computer programs

Owner the only one with legal right to reproduce the work, sell it, or allow others to use it

Lasts the holder’s life plus 70 years

After that, work becomes part of public domain

Copyrights

In groups of three, design a trademark for either a real or imagined business.

THEY DO Team Activity(10 minutes)

What do you think daily like would be like if government did not regulate business in any way?

THEY DO Discussion Starter

Consumer LawTo protect consumers from unfair business practices, the federal and state governments have established consumer protection laws.

Business treated you unfairly?

Write a letter of complaint to the FTC.

Will take action against a company if it receives enough consumer complaints to establish a “pattern of wrongdoing”

Used Car Rule requires dealers to tell customers important information about a used car

Telemarketing Sales Rule helps protect from being bombarded with unwanted telemarketing calls by placing limitations on companies

The Federal Trade Commission

Food and Drug Administration (FDA) protects against problems wit mislabeled and impure foods, drugs, cosmetics, and medical devices.

Approves all new drugs before sold

Fair Packaging and Labeling Act requires manufacturers of foods, drugs, cosmetics, and medical devices to clearly label products with the name of the manufacturer, the contents, and the amount the package contains.

Labels on packaged food must provide complete nutritional information.

Other Rules that Protect Consumers

Commercial Law(The basic commercial law document is called theUniform Commercial Code)

Contracts Business Sales Contracts

An agreement between two parties to carry out a transaction

Can be enforced in a court of law

Must follow specific rules to stand up in court

Often difficult to break Must state parties agreed

and give the quantity of goods involved

Often short, simple documents that meet the requirements of the Uniform Commercial Code

Managers involved at every stage of assembling and reviewing contract

Ensure the right information gets to the people who make the contracts

Sorry Charlie: Starkist Must Compensate Consumers

Summarize with 3-2-1 Review◦ 3 Things You Learned◦ 2 Things You Found Interesting◦ 1 Question You Still Have

Reading With a Pen

If there is a disagreement between two businesses about what certain provisions in a contract really mean, how should they resolve their dispute?

YOU DO Drawing Conclusions

Regulates who can operate a business and where owners can set up shop

A way to limit and control people who plan to enter certain types of businesses

Government officials can take away license from business not complying with laws and regulations

May also regulate through building codes, which regulate physical features or structures of buildings

Licensing and Zoning Law

Stan and Linda have a perpetual yard sale business. They buy and sell used items, like clothes, furniture, and tires, under an awning in their front yard.

What government regulations are probably being violated?

YOU DO, THEY DO Critical Thinking

Imagine you want to raise and sell organic fruit.

Using the six areas of law, make a list of question you will need answered to start this business.

YOU DO Application Activity(10 minutes)

What kinds of business activities do you think should and should not be regulated? Explain your answer.

YOU DO, THEY DOEvaluating Information

1. How can the government enforce its regulations against businesses?

2. List three types of business ownership.3. Why should businesses be concerned about

taxes?4. What kind of intellectual property law protects

an invention? A soft drink’s logo? A hit movie?5. True of False: Consumer protection laws apply

to both individuals and businesses.6. Why does a manager need to know exactly

what is contained in a business contract?

YOU DO Fact and Idea Review

Ted Change is the government affairs manager for Emerging Inc., a software firm in California. He just found out that California has passed two new laws. One law raises income taxes from 30 t0 35 percent on company profits. The other law restricts companies from selling software to consumers without including instructional guides in the packages. Ted’s boss asks him to write a memo about the effects the laws may have on the company.

Apply: Prepare a memo answering these questions: If Emerging makes $100,000 in profit, how much more in taxes will it have to pay? What kind of law is the “how-to” guide restriction. (Prepare in Word and Print.)

YOU DO Case Analysis