Business Administration Unit 2 – Forms of Business Ownership & The Law Chapter 7 Legal Aspects of Business

Text Book Page 165 Legal Limits for a Taxi Business

Controversial Issue Should a federal law be passed that would prevent all organizations that collect information about individuals from selling of sharing that information with anyone else without their written consent? 3-5 reasons for yes 3-5 reasons for no

Monopoly One company provides product/service without competition Can control supply & price Prices are usually high

Monopoly Gvt. approved monopolies Regulates prices & policies Natural gas company

Monopoly Deregulation Monopolies eliminated or weakened Commercial airfare, phone company, railroads, Peco Resulted in lower prices & better service

Deregulation Research Use the Internet to research the following questions What industry was deregulated in PA within the past 15 years? In what way was is deregulated? Why was it deregulated? Was it successful? What does the future hold for this industry?

Fair Competition Gvt. agencies & laws promoting fair competition Sherman Act Clayton Act Robinson-Patman Act Wheeler-Lea Act

Sherman Act 1890 – discourages monopolies Outlaws business agreements between competitors Setting selling prices

Clayton Act 1914 Forbids acquiring ownership of another company to create a monopoly Outlaws contracts make you buy one item to get another Microsoft forced computer mfgs. buying Windows O.S. to also buy I.E.

Robinson-Patman Act 1936 Price discrimination Different prices to different customers Unless sold as different quality or quantity

Wheeler-Lea Act 1938 Forbids unfair or deceptive acts/practices False advertising Misleading important info Failure to reveal facts Drugs, medical devices, cosmetics, food

Federal Agencies FTC FAA FCC Federal Trade Commission See pg. 169 - Fig. 7-1 FAA Federal Aviation Admin. FCC Federal Communications Comm.

Federal Agencies FDA NRC SEC Food & Drug Admin. Nuclear Regulatory Comm. SEC Securities & Exchange Comm.

Bankruptcy Legal process Selling of assets to pay debt Excess debt forgiven Bad credit rating – 10 years Can’t declare again – 6 years

PA Bankruptcy Research Use the following website to answer the questions below: http://www.pennsylvania-bankruptcy.com/ What are the steps/requirements for filing for bankruptcy in PA? What property can you protect from creditors when you file bankruptcy in Pennsylvania? Explain Pennsylvania Debt Consolidation as an Alternative to Bankruptcy Explain the difference between Chapter 7 and Chapter 13 bankruptcy http://www.pennsylvania-bankruptcy.com/7v13.html 7 and 13 Advantages and Disadvantages

Patents Inventor has sole right to make, use, & sell invention or process for 20 years Inventor can license to others Temporary monopoly Encourages mfg. to invest $ in R&D Digital cameras, synthetic tissue, insulin

Copyright Author has sole right to reproduce, publish & sell literary or artistic work for life + 70 years Author can permit others to copy Protects CD games & music, video & audio tapes & computer software

Trademarks Distinguishing name, symbol, or special mark Owner only person legally allowed to use

Trademarks Symbols Company or product name Nike “swoosh” McDonald’s “golden arches” Company or product name Sony “Walkman” “Game Boy”

Trademarks Rights continue indefinitely unless: Mark is abandoned OR Loses significance by becoming generic Escalator, linoleum, zipper

Internet Trademark sites Handout www.uspto.gov/ http://www.sba.gov/starting/indextrademarks.html Handout Obtaining a Patent

Public Protection FDA regulates Impure, improperly labeled, falsely guaranteed & drugs unhealthful foods & cosmetics Extensive drug testing Costs escalate Drives up insurance costs

Public Protection Non-Food Labels on possible dangerous items Health warning on cigarettes Prohibits sale under 18

Public Protection Consumer Product Safety Act Warranty Act Sets safety standards Recalls, repairs or halts sale Warranty Act Specifies action taken if defective product

Controversial Issue (debate) Should the federal government substantially raise the so-called “sin taxes” on tobacco products and alcoholic beverages to increase federal revenues and to discourage the use of these products? 3-5 Reasons for yes 3-5 Reasons for no 8 volunteers to debate this issue??

Text Book Page 174 – Ethical Issues Ethics & Internet Advertising Answer ?’s 2 & 3 Check if done Review in class

Information Information Liability Responsibility for physical or economic injury arising from incorrect or wrongful use of data Similar to product liability

Information Electronic Communications Privacy Act Crime to view, use, or change data (unauthorized) E-mail privacy

Information Cookies Files of info about web sites visited Stored on own computer Track interests & preferences for marketing Invasion of privacy???

State & Local Regs Interstate Commerce Intrastate Commerce Operations & transactions that cross state lines Intrastate Commerce Business transacted w/in state Large businesses Subject to fed, state & local laws

Licensing Limits & controls certain types of businesses Inspections Dirty restaurant inspected – loses license

Public Franchise Contract permits use of public property for private profit Taxi service, cable TV

Bld. Codes & Zoning Building Codes Zoning Local gvt. Control physical features of structures Height, sq. ft., type of materials Zoning What areas used for Homes or businesses

Taxes Used to fund new & on-going programs Regulate business activity Economic growth by lowering taxes High taxes on alcohol & tobacco Discourage use

Proportional Tax Flat Tax Rate remains same regardless of cost of item Real estate tax State income tax of 6%

Progressive Tax Based on ability to pay Combined proprtl. & prgrssv. Federal income tax Income up, taxes increase Combined proprtl. & prgrssv. Flat tax of 5% on incomes up to $20,000; 6% on incomes over $20,000

Regressive Tax Actual tax rate decreases as taxable amount increases Sales tax! Lower income pays a larger proportion of income in taxes Applies to purchases instead of income PA – no sales tax on food/clothing

Income Tax Tax on profits of business Earnings of individuals Net profit Earnings of individuals Based on salary & other income after deductions Income tax is largest revenue source for Fed. Gvt.

Sales Tax Tax on retail price of goods/services when sold Excise tax Retailers collect Excise tax Applies to selected items, higher or additional rate Cigarettes & gasoline

Sales Tax Main source of most states revenue Internet sales tax Yes or no???

Property Tax Tax - material goods owned Real Property Main revenue of local gvts. Real Property Real estate – land & bldgs. Personal Property Movable possessions Furniture, equipment

Property Tax Assessed valuation Value of property per tax official Tax rate of $2.80 per $100 of property with: Assessed valuation of $180,000 = $5,040 tax bill

Taxes-Business Decisions Determine accounting method How to pay management Where to locate new business Move existing business

Taxes Evaluation Answer the following questions in your own words. Explain the differences between proportional, progressive & regressive taxes and provide examples of each. Explain property tax, what qualifies and how is it determined? Why are taxes an important issue in starting a business?

Text Book Group work – 3-4 students Pages 187-190 Case 7-1 - ?’s 1-3 Check if done Review in class

Work Book Pgs. 57-58 – Study Guide Pgs. 60-63 Turn in Don’t do 7-D #4, 7-F & 7-H Check if done Review in class

Test Unit 2 – next class meeting Chapters 5-6-7

End of Chapter 7