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Lecture 6

BUSI 1600U Lecture Notes - Lecture 6: Sole Proprietorship, Limited Liability, Corporate Tax


School
UOIT
Department
Business
Course Code
BUSI 1600U
Professor
Malcolm Mac Taggart
Lecture
6

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FORMS OF BUSINESS OWNERSHIP
Monday, September 28, 2015
8:30 AM
Sole proprietorship
oOne person owning and operating a business, without forming a
corporation.
oIn a sole proprietorship, the business and the owner are a single entity.
Advantages
oEase of start/end
oBe your own boss
oPride of ownership
oLeave legacy
oRetain pro+t
oNo special taxes
oFewer regulations
Liability
oLiability is often just another word for debt, but it also has a wider and
important meaning.
oFor a business, it includes the responsibility to pay all normal debts.
Unlimited liability
oWhen you work for others, it is their problem if the business is not
pro+table.
oWhen you own your own business, you and the business are
considered one. You have unlimited liability; that is, any debts or
damages incurred by the business are your debts, and you must pay
them.
oWhen you have a sole proprietorship, you have unlimited liability.
Disadvantages
oUnlimited liability
oLimited +nancial resources
oDi6culty in mgmt.
oTime commitment

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oFew fringe bene+ts
oLimited growth
oLimited life span
Partnership
Advantages
oMore +nancial resources
oShared Management
oLonger Survival
oNo special taxes
Partnership
There are several main types of partnerships:
oGeneral Partnership
oLimited Partnership
oGeneral Partner
oLimited Partner
General Partnership
oA partnership in which all owners share in operating the business and
in assuming liability for the business’s debts.
Limited Partnership
oA partnership with one or more general partners and one or more
limited partners.
General Partner
oAn owner (partner) who has unlimited liability and is active in
managing the +rm.
Limited Partner
oAn owner who invests money in the business but does not have any
management responsibility or liability for losses beyond the
investment
New forms of partnerships
oMaster Limited Partnership
Traded Publicly
Taxed as a partnership
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oLimited Liability partnership
Disadvantages
oUnlimited liability
oDivision of pro+ts
oDisagreements among partners
oDi6cult to terminate
Types of Partnerships
Corporations
Although the word
corporation
makes people think of big businesses such as
the Bank of Montreal or Irving Oil, it is not necessary to be big to incorporate
(i.e., start a corporation).
oObviously, many corporations are big; however, incorporating may also
be bene+cial for small businesses.
Advantages
oMore money for investment
oLimited liability
oSeparation of ownership/mgmt.
oEase of ownership change
oPerpetual life
oSize
Types of corporations
oPrivate: not traded on any stock exchange
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