Business Organization

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Business Organization

• Economics 11
• Stewart

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Lets Review

• Primary Industry
• Secondary Industry
• Service Industry

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Forms of Business Organization

• Economic activity firms
• Firms
• Designed to achieve maximum profit by providing
  goods and services for which customers are
  willing/able to pay

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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)

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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
• Sold stockbroker, stock market
• Owners shareholder (few 1000s)
• Oldest Hudsons Bay Company

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The Corporation

• Common shares
• Shareholder has voting rights
• Preferred shares
• Preferential position for profits and assets
• No voting rights
• Vote in person or proxy

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Advantages

• Profit distribution
• Re-invest into firm self financing
• Dividends not reinvested shareholders
• - per share basis, Preferred, Common
• Obligations responsibility of corp
• Limited personal liability (investment)
• investors 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 Co-operative Enterprise

• Equally owned
• Must have common goal
• Retail Cooperative provide goods at reduced
  price
• Financial Cooperative arrange savings loans
  at better rates than banks
• Service Cooperatives provides housing, medical
  insurance equipment rentals
• Popular in Western and rural Eastern Canada

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The Co-operative Enterprise contd.

• Each member has a single vote majority wins
• Board of Directors (annual)
• Roles are voluntarily
• Ie. Credit Unions

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Advantages

• One vote equal say
• Obtain and sell goods at a better price
• Limited personal liability
• Patronage return profit based upon amount of
  business transacted by each individual
• 1 of goods sold 1 of profit

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Disadvantages

• Decision making equal say different ideas
• Unpaid positions discourage many
• Investment funds only from members less capital
  when needed
• Business only with existing members limited
  customers business volume
• Serve members NOT profit

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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)