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Business Administration
Unit 2 – Forms of Business Ownership & The Law
Chapter 7Legal Aspects of 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 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 questions1. What industry was deregulated in PA
within the past 15 years?2. In what way was is deregulated?3. Why was it deregulated?4. Was it successful?5. 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 advertisingMisleading important info
Failure to reveal facts Drugs, medical devices, cosmetics, food
Federal Agencies FTC
Federal Trade Commission See pg. 169 - Fig. 7-1
FAA Federal Aviation Admin.
FCC Federal Communications Comm.
Federal Agencies FDA
Food & Drug Admin. NRC
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/
1. What are the steps/requirements for filing for bankruptcy in PA?2. What property can you protect from creditors when you file
bankruptcy in Pennsylvania?3. Explain Pennsylvania Debt Consolidation as an Alternative to
Bankruptcy4. Explain the difference between Chapter 7 and Chapter 13 bankruptcy
http://www.pennsylvania-bankruptcy.com/7v13.html
5. 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 Symbols
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
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 testingCosts escalateDrives 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 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 Operations & transactions that cross state lines
Intrastate Commerce Business transacted w/in state
Large businesses Subject to fed, state & local laws
Limits & controls certain types of businesses Inspections
Dirty restaurant inspected – loses license
Licensing
Bld. Codes & Zoning
Building Codes 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 taxState income tax of 6%
Progressive Tax Based on ability to pay
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
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 Retailers collect
Excise tax Applies to selected items, higher or additional rate
Cigarettes & gasoline
Property Tax Tax - material goods owned 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. 1. Explain the differences between proportional,
progressive & regressive taxes and provide examples of each.
2. Explain property tax, what qualifies and how is it determined?
3. 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 Case 7-2 - ?’s 1-4
Check if doneReview in class
Work Book Pgs. 57-58 – Study Guide
Turn in Pgs. 60-63
Don’t do 7-D #4, 7-F & 7-HCheck if doneReview in class