Subclass not inheriting parent class

You never called the parent class's __init__ function, which is where those attributes are defined:

class Manager(Employee): 
  def __init__(self, reports):
    super(Manager, self).__init__()
    self.reports = reports

To do this, you'd have to modify the Employee class's __init__ function and give the parameters default values:

class Employee(object): 
  def __init__(self, emp=None, name=None, seat=None):
    self.emp = emp
    self.name = name
    self.seat = seat

Also, this code will not work at all:

  def totalreports(self):
    return reports

reports's scope is only within the __init__ function, so it will be undefined. You'd have to use self.reports instead of reports.

As for your final question, your structure won't really allow you to do this nicely. I would create a third class to handle employees and managers:

class Business(object):
  def __init__(self, name):
    self.name = name
    self.employees = []
    self.managers = []

  def employee_names(self);
    return [employee.name for employee in self.employees]

You'd have to add employees to the business by appending them to the appropriate list objects.

You need to run the superclass's init() in the appropriate place, plus capture the (unknown to the subclass) arguments and pass them up:

class Manager(Employee): 
  def __init__(self, reports, *args, **kwargs):
    self.reports = reports
    reports = [] 
    super(Manager, self).__init__(*args, **kwargs)
    reports.append(self.name) #getting an error that name isn't an attribute. Why?