MGTA01H3 Chapter Notes - Chapter 4: Sole Proprietorship, Takeover, Lemonade Stand

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16 Dec 2012
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MGTA01H3 Full Course Notes
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Chapter 4: understanding legal forms of business organization. But only accounts for only small proportion of business revenues. 4 forms of legal ownership available: the sole proprietorship. Sole proprietorship: business owned and operated by one person. Legally considered to be an extension of yourself (not a separate legal entity) May be small (lemonade stand) or large (steel mill) Majority of businesses in canada are in this form. Freedom; sole proprietors answer to no one but themselves. Easy to form; don"t even need to register to start operating. Simplicity of legal setup procedures makes this form appealing to self-starters. Tax benefit; losses can be deducted from income the proprietor earns from personal sources other than business. Unlimited liability: personal liability for all debts of the business (major drawback) If business fails to generate enough cash, bills must be paid out of owner"s pocket. Bankers fear they won"t be able to recover loans if owner becomes disabled.

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