MGTA01H3 Lecture Notes - Lecture 8: Sole Proprietorship, Legal Personality, Canadian Business

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25 Nov 2013
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Lecture 8- November 4
3 major ways in which you can own a business in this Country
1. Sole proprietorship
2. Partnership
3. Corporations
On final exam: advantage of sole proprietorships, in a market economy, you don’t
need to fill out any forms, you don’t have to pay any fees, don’t have to ask or tell the
government. You just start your business. It’s easy and free.
Risks: if you screw up, harm your client, etc. you are solely liable- they will sue you
personally and they will sue as much money as they can get away with
On final exam: personal and unlimited liability ; joint and several liability (each
partner responsible for debts of partnership, even when incurred by another
partner
Review: Sole Proprietorship
Easiest way to form a business
Most common form of ownership
But:
Personal liability
Unlimited liability
Review: Partnership
Two (or more) heads
are better than one
But: 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.
Review: Corporations
Does require paperwork and fees
Appropriate for businesses that want:
larger number of owners: you try to get your family and friends to join
the business, to help you
split between owners / managers
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limited liability for owners: a corporation is a separate legal entity;
that’s why you have to fill out all the paperwork
Responsible for its own debts.
Owned by shareholders
Shareholders have limited liability:
(Can’t be sued. Can lose only their investment- whatever they paid for
their shares)
Corporations Shares
-is a piece of paper; a receipt; it’s what an investor gets for pumping money into a
corporation
A shares represents ownership
Investor pays $$ for a share of ownership
1 share = 1 vote
More shares = more ownership = more votes
- when the prof googled shares certificate, the first one to come up was
Microsoft
- Bill Gates doesn’t own Microsoft. He owns a BIG chunk of Microsoft
Chris “Owns” the Royal Bank
Prof. Bovaird owns 212 shares
in the Royal Bank of Canada
400,000 other my slice people also own shares
They own approx. 1,400,000,000 shares
Shares: Worth What You Pay
Articles of incorporation in Canada
A share has no fixed or inherent value.
A share is “worth” what you pay for it.
People will pay more if they think the business is well-managed, and growing.
“value” of a share goes up and down every day, with changing developments.
Mixed Market economy: we put up with a certain amount of government regulation
We put up with CRTC
Bell is gonna continue to screw Canadian consumers.
Corporations Minimum Size
In Ontario you can create a corporation:
Selling 1 share
To 1 shareholder
Who pays 1¢
Shareholder elects 1 director
Corporation hires 1 employee
Not a sole proprietorship a private corporation
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