October 5 , 2012
Lecture 4 – Forms of Business Ownership
70% of Canadian business are incorporations
Sole proprietorships – individuals working for themselves
o One person owning and operating a business, without forming a
o Personal income
o Possible to write off expenses
o “my” income/expenses
o Anything that happens in that business happens to the personal self
No separation between business and self
o Personal liability for any activity
o Make sure insurance covers
Ease of start/end- Just need the required equipment or work
space to start. May need permit or license for some businesses
but it is always easy to get and stopping is just as easy as
Be your own boss- You make all the decisions, and all the
mistakes will be yours and it will affect you and all the victories
will be yours.
Pride of ownership- Sole proprietorships deserve all the
credit for taking the risks and providing needed products
Leave legacy- Can be passed down to your kids and family.
Retain profit- All profit goes to you and you wont have to
share it with anyone except the government for taxes.
No special taxes- All taxes are counted as personal income tax
and it lower than corporate taxes. Also can claim losses from
business to decrease tax.
Fewer regulations- Less regulations, and administration is
Unlimited liability- The risk of bearing 100% of loss. Any
debt, damage is for you to pay, it has to come from your
pockets and can lead to selling your house, car, and everything
else you own if your business goes down.
Limited financial resources- Limited to the funds you have
and what you can bring from loans, and how much you raise.
Difficulty in mgmt.- Many sole proprietors don’t have the
skills to a good management skills such as inventory records,
accounting records, tax records, and so forth. Hard to get
someone because corporations pay better for accountants ect. Time commitment- You as the sole owner will have to work
extra hourse if needed, and this means no vacation or sick
days. Gets in the way of family life for many sole owners.
Few fringe benefits- Loses or doesn’t get the benefits for
working for corporations. No health insurance, no disability
insurance, no sick leave, no vacation pay.
Limited growth- Expansion is often slow, because it depends
on the creativity, funding, and the business mind of the owner.
Limited life span- The business dies if you dies, unless it is
bought or taken over by your heir. Valuable leases and
contracts may not.
o Access to resources
o Brings expertise
o Share workload
o Do not bring in friends if you feel they wont be an asset to the
When other people are brought in, it leads to conflict
o Several main types of partnership
Each person has a role to play (Ex. Marketing,