Forms of Business Organizations and Ownership

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Forms of Business Organizations and Ownership

• Business Management 12
• Stewart

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Sole Proprietorship

• Business owned and operated by one person
• Solely responsible for profits or debts
• Very common in Canadian economy
• Ie. Small local business

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Advantages

• Own boss
• Confidentiality
• Any others?

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Disadvantages

• Unlimited personal liability
• - proprietors personal assets can be seized to
  pay outstanding debts
• No one else to rely on for funds/run business
• Difficult expensive to obtain loans
• Progressive income tax ( income tax)

5
The Partnership

• Owned by 2 or more
• Bound by a partnership agreement
• no one set form
• outlines rights and responsibilities
• General Partnership
• All partners participate in management
• Unlimited personal liability for business losses

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The Partnership

• Limited partnership
• limited partners
• at least one general partner
• Not permitted to take part in management
• Personally liable for debts only up to their
  initial investment
• No additional personal assets can be seized
• Ie. Law firm, architects, accountants

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Advantages

• Pooling of talent capital
• Personal motivation satisfaction
• Attracts capital
• Obtaining credit is easier interest rate

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Disadvantages

• Progressive income tax
• Not easy to sell shares (approval)
• Right to retire (no new partner)
• Investment funds only from within (personal
  savings/mortgages)
• Disputes
• Legally terminates due to death, mental
  incapacitation, financially insolvent, breach of
  partnership

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Advantage or Disadvantage?

• Unlimited personal liability
• Joint liability all partners liable for debts
• Several liability partner doesnt pay?
• All other partners must pay debt

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The Corporation

• Public (shares traded freely) or private (shares
  traded only with approval)
• Established ONLY with govt authorization
• Shares corporate assets, equal capital
• Sold stockbroker, stock market
• Owners shareholder (few 1000s)
• Oldest Hudsons Bay Company

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Advantages

• Profit distribution
• Re-invest into firm self financing
• Dividends not reinvested shareholders
• Obligations responsibility of corp
• Limited personal liability (investment)
• Investors on a large scale
• Shares transfer
• Lower income tax

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Disadvantages

• Govt fee much
• Closely regulated by govt
• - books (all aspects), annual meetings,
  financial statements tax returns
• Privacy? (competition)
• control

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The Government Enterprise

• Owned by federal, provincial or municipal
• Provide services that are costly
• Set up to standardize services jobs
• Crown corporations govt not person holds
  all/most shares
• Ie. Canada Post, the CBC, Via Rail, Hydro One
  (ON)

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Not for Profit

• Refers to an organization that uses surplus
  revenues to achieve its goals, rather than
  distributing them as profit
• Not-for-profit organizations are permitted to
  generate surplus revenues they must be retained
  by the organization for its self-preservation,
  expansion, or plans.