Unit 1

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Unit 1 Chapter 2

• Types of Business Ownership

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Introduction

• Deciding which type of business ownership you
  want to establish needs serious thought.
• Each has it advantages, but each also has some
  disadvantages.
• Over time, the form of business ownership you use
  can change! Thats a G??D thing!!

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We will explore

• The different types
• Features of each type
• Advantages
• Disadvantages / risks

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Types of Business Ownership

• Sole Proprietorship
• Partnership
• Corporation
• Cooperative
• Franchise

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Sole Proprietorship

• a business owned and operated by one person.
• The owner is responsible for all operations of
  the business AND
• assumes all the risks.

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Sole Proprietorship

• this is the most common form of business in
  Canada!!

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Common Businesses that are Sole Proprietors

• architects
• artists
• authors
• baby-sitters
• carpenters
• computer specialists
• construction consultants
• digital designers
• Web designers

• ecotourism guides
• engineers
• environmental consultants
• farmers
• gardeners
• industrial designers
• inventors
• photographers
• researchers
• song-writers

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Sole Proprietorship

• WHY would a person want to Go it Alone when
  opening a business?
• What problems or issues might arise because a
  person owns a business ALONE?
• Why might it NOT be a good idea to own it alone?

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Sole Proprietor- Advantages

• Owner in direct control of decision making - you
  are your OWN BOSS!!
• All profits to owner. Cha-Ching !!
• Tax advantages to owner (Ie. Write-offs).
• Secrecy (Shhhh!!) of financial information.
• Relatively low start-up costs (Ex. home-based
  businesses)
• Greatest freedom from regulation.
• Minimal working capital required.

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Sole Proprietor - Disadvantages

• Unlimited liability DEBTAWWWWW!!!!!!!!!
• Lack of continuity in absence of owner
• Difficulty raising capital.
• Costs time commitment can be high.

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Unlimited liability.a closer look!!

• Owner is fully responsible for all debts and
  obligations related to his or her business.
• A creditor (those whom you owe money to) with a
  claim has a right against all of his or her
  assets.
• Business OR personal.
• Ex. Personal Savings, vehicles, properties, home,
  equipment etc..

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Expanding Your Knowledge p. 33

1. Define the term Collateral.
2. When would a person need collateral?
3. What kinds of things would be used as collateral?
4. What collateral would a teenager possibly have?

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Partnership

• two or more people own and operate the business
  together.
• Created by a written legal document called a
  partnership agreement.
• 2 types of partnership
• General partnership
• Limited partnership

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Partnership - General partnership

• EACH PARTNER
• shares the management of the business.
• is personally liable for all the debts of the
  business. (Unlimited liability)
• is responsible for and must assume the
  consequences of the actions of the other
  partner(s).

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Partnership Limited partnership

• A LIMITED PARTNER
• contributes only capital.
• takes no part in control or management.
• is liable for debts to a specified extent only or
  original investment. (limited liability)

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Limited liability.a closer look!!

• all debts and obligations related to the business
  are limited to business assets only.
• A partners risk is limited to monies invested
  into the business.

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Partnership

• WHY would a person want to have a partner when
  opening a business?
• What problems or issues might arise because more
  than one person owns the business?
• Why might it NOT be a good idea to have a partner
  ?

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Partnership - Advantages

• Partners co-own the business.
• They share responsibilities.
• They share time commitment.
• They may have greater financial resources.
• They share business losses.
• Variety of skills and experience may help the
  business to make more profit.
• Ease of formation.
• Relatively low start-up costs (Ex. home-based
  businesses)

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Partnership - Disadvantages

• Partners have unlimited liability for all the
  other partners.
• They may have conflicts.
• Profits are shared.
• Partnerships are more difficult to close down
  than sole proprietorships.
• Lack of continuity
• Difficulty raising additional capital
• Hard to find suitable partners
• Partners can legally bind each other without
  prior approval

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Corporations

• A corporation is a legal entity that exists
  independently of its owners,
• its owners are called shareholders.
• Shareholders, the people who buy shares in a
  company,are all part owners of the company.
• A corporation is identified by the terms
  "Limited", "Ltd.", "Incorporated", "Inc.",
  "Corporation", or "Corp.".

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Corporations - Advantages

• Separate legal entity.
• The owners are shareholders. They have limited
  liability for the debts.
• ownership is transferable, therefore continuous
  existence is possible
• Ex. A corporation can continue to exist after the
  death of its owners.

• Corporations usually have a lower tax rate than
  private owners (possible tax advantage).
• easier to raise capital. (sell more shares!)
• Usually shareholders do not operate the company.
  They hire employees to do so.
• specialized management hired.

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Corporations - Disadvantages

• Corporations have more complicated structures
  (Ex. Board of Directors)
• Corporations must publish annual reports, which
  could give away important secrets to competitors.
• closely regulated and extensive record keeping
  necessary
• The value of company shares can change depending
  on changes in the stock market.

• most expensive form to organize
• double taxation of dividends
• share the profits, usually small.
• Possible development of conflict between
  shareholders and executives.
• Employees who are not owners may not be committed
  to the business.

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Expanding Your Knowledge p. 36-40

1. Identify and briefly describe the 4 types of
   corporations.
2. Name 2 examples of each type of corporation.
3. Describe or define Articles of Incorporation,
   Merger, Acquisition

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Co-operatives

• Co-operatives, also called co-ops, are businesses
  owned and operated by a group of people with a
  strong common interest.
• the members have a close association with the
  enterprise as producers or consumers of its
  products or services, or as its employees.
• The start-up costs are shared among the members
  of the co-operative.
• Members own and control the business and make all
  business decisions.
• There are different types of co-ops (farmers,
  financial services, consumersetc..)

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Co-operatives F.Y.I.

• Cooperatives are based on the values of
  self-help, self-responsibility, democracy and
  equality.
• Membership is open, meaning that anyone who
  satisfies certain conditions may join.
• Economic benefits are distributed proportionally.
• Cooperatives may be generally classified as
  either consumer cooperatives or producer
  cooperatives.
• Read p. 40 TEXT

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Co-operatives F.Y.I.

• Building cooperative - pool resources to build
  housing, normally using a high proportion of
  their own labour. When the building is finished,
  each member is the sole owner of a homestead, and
  the cooperative may be dissolved.
• Retailers' cooperative - employs economies of
  scale on behalf of its members to get discounts
  from manufacturers and to pool marketing. It is
  common for locally-owned grocery stores, hardware
  stores and pharmacies.
• Worker cooperative - owned and democratically
  controlled by its "worker-owners".

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Co-operatives F.Y.I.

• Consumers' cooperative - is a business owned by
  its customers. The CO-OP grocery store!!
• Agricultural cooperative - are both marketing and
  supply cooperatives. They promote and may
  actually distribute specific commodities as well
  as provide inputs into the agricultural process.
• Cooperative banking (credit union) provides a
  broader range of loan and savings products at a
  much cheaper cost to their members.

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Co-operatives - Advantages

• Members help run the business and share in
  financial decisions.
• Variety of different skills to run the business.
• Shared ownership less risk than it would be for
  a sole proprietor or a partner.
• Limited Liability to the amount of your share in
  the capital of the co-op. (Ie. Membership fee or
  cost of share).

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Co-operatives - Advantages

• One person one vote, no one person or group of
  people can dominate business.
• High volume of business more of the profits.
• Members receive favorable prices because they buy
  goods in large quantities (bulk).
• Co-ops also control the sale and price of goods
  produced by members. This helps members get the
  best price.

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Cooperatives - Disadvantages

• Difficulty raising additional funds to expand
  their business.
• Having only one vote can be a disadvantage.
  Members may not want to invest more money
• Decision-making can be difficult because of the
  number of people involved.
• Commitment of the members may vary. Ex. Some may
  have more money at stake or take the business
  more seriously than others.

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Franchise System

• Franchise Agreement
• Franchisor
• Franchisee

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Franchise

• A franchise agreement is the written contract
  between the franchise seller (franchisor) and
  buyer (franchisee).
• A franchisor sells the rights to use the business
  name and to sell a product or service in a given
  territory.
• The franchisee purchases the right to distribute
  the products, use techniques (supplies
  packaging), and trademarks (name and logos etc.)
  of the franchise.

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Franchise

• Advertising, training, and other support services
  are commonly made available by the franchisor.
• Franchisee runs business by franchisors
  rules/procedures.
• Franchisee buys materials from franchisor /
  approved supplier.
• In return, the franchisor, receives a royalty fee
  based on a percentage of gross monthly sales
• (even if the franchisee does NOT earn a profit!)

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Franchise Contract
Franchisor, Inc.
Branded Product/Service
Performance Monitoring

Franchisee
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Franchise - Advantages

• Franchisees buy a business with a good
  reputation, well known name and products.
• Franchisors supply training and financial
  knowledge.
• Franchisors usually provide packaging,
  advertising, and equipment to the franchisee.

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Franchise - Disadvantages

• Franchises can be expensive to buy.
• Franchisees may have to follow a lot of rules
  laid down by the franchisors. No or limited
  control.
• If a franchisors business fails, so will the
  franchisees business.

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http//ms.radio-canada.ca/archives_new/2006/en/wmv
/td_mcdonalds19900131et1.wmv
http//archives.cbc.ca/on_this_day/01/31/12844/
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Growth in Canadian Business

• The business environment constantly changes.
• To survive, people in business must be prepared
  to take advantage of the opportunities that
  change offers.
• Some of these changes include
• advances in technologies, especially in
  information technologies
• an increase in global business connections
• the growth of the small business and service
  sectors
• a greater emphasis on the natural environment
• a focus on business ethics and social
  responsibility

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Technological Change The Technological
Revolution!!!!!

• New technologies change the way businesses
• Produce goods,
• Buy goods,
• Sell goods and services,
• The way they communicate with each other,
• The way they obtain financial and other
  resources,
• Even the ways that people work and types of jobs.
• Not to mention creating a new forms of business
  existence.

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The Information Age

• Competition among businesses is very fierce.
• One of the things that gives companies a
  competitive edge is information.
• Information technologies, such as laptop and
  palm-held computers and cellular phones, give
  employees fast access to information.

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The Information Age

• This information can help a business operate
  efficiently and quickly. Examples
• Track the movement of their shipments.
• Search the world to find the best quality and
  price for production materials and other
  resources.
• Internet based security.
• Financing and loans from any place.

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Increased Globalization

• The information age and communication technology
  have reduced the impact of the geographic
  barriers.
• Doing business internationally is called
  globalization.
• Globalization gives Canadian businesses the
  chance to increase
• their customer markets.()
• their profits.()
• competition for markets. (-)

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Growth of Small Business

• A small business is one that is
• independently operated
• not dominant in its field
• limits in terms of employees (lt 50 employees, lt
  100 employees in the manufacturing sector)
• has limits in annual sales.

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Growth of Small Business

• A small business usually
• started by entrepreneurs who saw a need or market
  trend
• most often in the service sector
• owners tend to develop a close relationship with
  their customers.
• Read top page 50.

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Growth of Small Business Home-based businesses

• small businesses are being operated from homes.
• are considered the fastest growing form of small
  business.
• have only one employee, the owner.
• to reduce their operating expenses.

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Growth of the Service Sector

• The most significant growth of small businesses
  in Canada has been in the service sector.
• One reason for this growth is that Canadians have
  more money and less time. (need others to do
  things for us).
• Example The success of the Molly Maid franchise
  happened largely because people are willing to
  pay others to clean their homes.

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Growth of the Service Sector

• Another reason for the service sectors growth is
  that fewer manufacturing jobs are available.
• Canada has an aging population, services that are
  critical to the elderly, such as health care, are
  likely to be more in demand.

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Growing Concern for the Environment

• Worldwide concern for the environment has had a
  significant impact on the way businesses are run.
• Among the concerns are
• the depletion of the ozone layer global
  warming.
• toxic waste in our water systems.
• huge amounts of waste and garbage.

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Growing Concern for the Environment

• In 1999, the federal government passed the new
  Canadian Environmental Protection Act,
• focuses on
• pollution prevention
• protection of the environment
• human health
• in order to contribute to sustainable
  development.
• Canadian businesses are required to incorporate
  environmentally responsible policies in their
  normal operations.

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EXAMPLES

• No CFCs
• CFL (Compact Florescent Lights)
• Scrubbers for stacks
• Minimum recyclable content (paper)
• Recycle cardboard, plastics, aluminum and
  bottles.
• Water meters
• Phosphate-free detergents
• Use of organics over chemical fertilizers,
  herbicides and pesticides.
• Catalytic converters on vehicles.
• Environmental risk assessments-woods operations
  etc.

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http//216.128.16.108/streamingmedia/NWNA-External
.wmv
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Business Ethics and Social Responsibility

• Ethics are standards of conduct that society
  believes people should follow.
• socially responsible towards their employees,
  their immediate community, and the wider global
  community.
• Social responsibility is the duty to care for
  others whose actions can be affected in a
  damaging way.
• A major force for change during the last 100
  years has been the labour movement (unions).
• serious issues such as dangerous working
  conditions, lack of pensions or compensation for
  injured workers, child labour, low pay, and long
  hours.

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Some goals of socially responsible
businesses and citizens are

• to end discrimination of women and minorities in
  terms of hiring, promotion, salaries, and firing
• to halt the production and sale of weapons and
  land mines.
• to practice sustainable development and not to
  allow short-term economic considerations to
  replace longer-term,
• to end white-collar crime (usually thefts by
  employees), which has become more complicated in
  the age of Internet finance
• to ensure that the Canadian marketplace remains
  fair and competitive by outlawing price fixing
  and bid rigging (secret agreements among
  competitors to control prices)
• to eliminate from the global market place
  dangerous drugs produced by pharmaceutical
  companies.

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social responsibility McDonalds

• http//www.youtube.com/watch?vS_bgP3ASUM4