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ADM 1300 Notes

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1Forms of OwnershipoSole proprietorships partnerships and corporations2Sole proprietorshipoWhen management and ownership of a business are one and the sameoThe individual IS the businessoThe oldest and most common form of legal ownership in Canada 6070oAdvantagesEasy to formdissolve must be legalLicense may be requiredSimplicityGovernment preferential treatmentmixed economygovt provides some goodsservices so does private sectorSold claim on all profits lossesPersonal incentivesatisfactionPays only personal income taxprogressive tax systemgreater taxable income greater tax bracketSecrecyoDisadvantagesUnlimited liabilityYou can buy liability insuranceLack on continuity uncertainty of durationDifficulty in raising moneyManagement limitations3PartnershipsoWhen two or more people combine their financial managerial and technical abilities to operate a business for profitCant incorporate because they have to be personally liableoTypes of partnershipsGeneral ParternershipsAll partners have unlimited or general liabilityMost in Canada are generalLimited PartnershipsOne general partner by lawHas to have reasonable assetsOne or more limited partners2Articles of partnershipoPrevents misunderstanding and illwill at some future dateoNot legally required in CanadaoMust be sober 3Partnership advantagesoEasy to formoOwners are taxed at personal rateoLarger availability of moneyoDiversification of management skillsoRetention of valuable employeesoPersonal interestsatisfaction4Partnership disadvantagesoUsually unlimited liability joint and several liabilityoManagement difficultiesoDifficult to withdraw investmentDeathInsanityIncarcerationSimple withdraw5Corporationseconomicsocial benefitsoMost effective means of managing productive resourcesland labour capitaloProfessional management and researchoHigher living standardsThe circulation of assets process6Corporationseconomicsocial problemsoBignessMonopoliesMoralePrice fixingoEnvironmentaloPolitical7Forming the corporationsoDone either federally or provinciallyoArticles of Incorporation must be drawcharter or letters patentName of corporation not now in useTypenumber of shares to be issuedNumber of directorsLocation of operationsPurpose of business8Control of the corporationoShareholdersoBoard of directors dont HAVE to own sharesoSenior management appointed by board9ShareholdersoThe owners or the corporationoBasically there are two classifications of shareholdersCommon residualPreferred10Rights of the shareholderoTo vote for the board one vote per common shareoTo receive dividends IF declaredoTo holdsell any share registered in nameoTo share in assets on a pro rata basisoPreemptive right the right to maintain percentage ownership of businessoTo inspect the booksHow Does a Corporation Obtain Funds1Equity financingoThe selling of shares in the businessoDiluting ownership2Debt financingoThe borrowing of money
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