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Lecture 7

MGTA01 Lecture 7 – Oct 28.docx

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Management (MGT)
Chris Bovaird

Lecture 7 – Oct 28, 2013 3 Main Forms of Ownership In Canada, 3 common forms 1. Sole Proprietorship 2. Partnership 3. Corporation There are others (much less common) Sole Proprietorship Easiest way to form a business Most common form of ownership Some of you are sole proprietors Examples… A business owned by 1 person (but not necessarily that Sole proprietor: supplies all the capital makes all decisions keeps all profits responsible for all debts Business owned by 1 person Sole proprietor can have employees. (can have many employees) But – ultimately – there’s just one boss Sole Proprietorship – Advantages Easy to set up: No regulatory requirements No mandatory accounting needs Cheap to set up: $60 - $70 if registered / $0 if notDoes not need to be registered Management / ownership clear Sole Proprietorship - Disadvantages Limits to owner’s skills Limits to owner’s resources Hard to get finance (bank loans) Personal liability Unlimited liability “Personal” Liability Because and your business are one and the same: You are personally responsible to pay any bills, settle any law- suits, and pick up all the pieces… If things go wrong! “Unlimited” Liability How much you might have to pay is unlimited. Your financial responsibility: Not limited to value of the job. Not limited to value of assets used on job If things go wrong, you can be sued for $$$ You could lose your house, car, life savings Partnership A Business owned / operated by 2 or more people acting together Examples… Partnership – Advantages Two (or 3) heads better than one More resources (human and financial) More credibility (more than 1owner) More contacts (potential customers) Partnership – Disadvantages Conflict (more than 1owner) Personal liability Unlimited liability Joint and several liability each partner responsible for debts of partnership, even when incurred by another partner. Partnership Agreements Agreement between partners Normally includes: how much $$ each partner contributed what each partner must do how the partners paid how profits distributed Between partners only. Not binding on others General Partnership Simplest form of Partnership All partners share in
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