Module 6 --- Forms of Business Ownership Concise notes taken from module 6 in the textbook, 20+ pages of reading reduced into 4 pages containing all relevant information presented in a way that is easy to study off of. Good luck studying :)

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University of Waterloo
Accounting & Financial Management
AFM 131
Robert Sproule

Module 6 STARTING A SMALL BUSINESSThree forms of business ownership o 1 Sole Proprietorship one person owning and operating a business without forming a corporationBusiness ownerbusinessSingle Entity o 2 Partnership a legal form of business with two or more parties o 3 Corporation a legal entity with authority to act and have liability separate from its ownersLiability for a business includes responsibility to pay all normal debts and to pay1 Because of court order2 Because of a law3 For performance under a contract4 For damages to a person or property Pros Cons Sole Proprietorship Easy to start and end the business Unlimited Liability All you have to do to start is to buy or lease risk of personal losses needed equipment put up announcements to The responsibility of business owners for all of say you are in business To stop you just the debts of the businessie You must pay stop simple as thatyour debts even if that means selling your car home etcBeing your own bossOne of the most common reasons for starting Limited financial resources a sole proprietorship Funds limited to how much money one person sole owner can gather Pride of OwnershipThey deserve all credit for taking risks and Management difficulties providing needed products Its hard for sole proprietors to find and attract good qualified employees because they cannot Retention of company profit compete with salary and benefits offered by You dont need to share money with anyone larger companies elseexcept governmenttaxes Overwhelming time commitment No special taxes They may set their own hours but it is hard to Because profit is considered yours from the get manage business train people and have time go it is only taxed once as your personal for everything else in life they have no one to incomeAnother advantage is they can claim share the burden withbusiness losses against other earned income decreasing personal taxes they need to pay Few fringe benefitsYou are your own boss you often lose fringe Less Regulation benefits you get from working for otherspaid Less regulated than corporations by health insurance paid disability insurance sick provincialterritorial governments and leave administration of proprietorship is less costlythan that of a corporation Limited growthGrowth is typically slow since it relies on its owner for most of its creativity business know how and fundingLimited lifespan If sole proprietor dies retires or is incapacitated business no longer exists unless sold or taken over by heirs Possibly pay higher taxes If business income 400000 it will usually be paying higher taxes than if it was incorporated tax rates are more advantageous if business is incorporated
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