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Chapter 3 & 4 Lecture

Management (MGT)
Course Code
Ingrid L.Stefanovic

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Chapter 3. ppt / 01
Laurence, Hugh
MGTA04, Lec. 03
Forms of Business Organization in Canada
Partnerships, Corporations and Strategic Alliances
o Sole proprietorship
o One person carries on a business
o No formalities are required
o Registration of business name desirable
o No legal requirements or costs
o Tax losses can be offset against other income
o Drawbacks
Unlimited liability of proprietor for debts and liabilities of the business
No continuity ± what happens when the owner dies
Depends on resources of the proprietor, and raising money can be difficult
o Partnerships
o A partnership is formed when:
Two or more persons
Carry on business together
With a view to profit
o Partners
Involved directly in the business and make business decisions themselves
Share in the profits
o Advantages
Tax losses flow through to the partners
Law, accounting can only be practiced in partnerships in Ontario
o Disadvantages
Unlimited liability of partners for the debts and liabilities of the
partnership business
Dealing with new and retiring partners
Limited partnerships allow investors some protection and give advantage
of tax loss flow ± throughs
o Limited Partnership
At least one general partner
x Has unlimited liability
x Manages the business
Several limited partners
x Passive investors in the business
x Liability limited to investment
x Must not manage the business
Used if business has high losses at start of business
x Multiple residential units
x Oil and gas exploration
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