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MGM101 Test 1 - 2011

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Dave Swanston

MGM101 Test 1 Short Answer Questions1Three of the more common organizational forms in Canada include sole proprietorships partnerships and corporations Discuss one advantage and one disadvantage of each form from an owners perspective 6 MarksTwo marks for each organizational form One for discussing an advantage from an owners perspective and one for discussing a disadvantage from an owners perspective Must actually discuss how they are advantages or disadvantages froman owners perspective not just list them You can assign a half mark for any advantage or disadvantage they accurately list but do not properly explain See Nickels text pages 171 to 181Sole ProprietorshipAdv Easy to start requiring minimal investment full control and retention of profit no special taxes and less regulationDis Unlimited liability can lack management expertise limited resources huge commitment limited lifespanPartnershipAdv Access to more capital resources and expertise shared responsibility and risk less regulation compared to corporation and no special taxes can include limited liabilityDis General partners still have unlimited liability division of profits and can lead to disagreements or conflict possibly higher tax rates and can be more difficult to dissolveCorporationsAdv Owner liability is limited Can be easier to raise money by selling partial ownership size and perpetual life separation of ownership and management can attract top management and make it easier to raise money easier to change ownersDis Expensive to start and requires extensive paperwork double taxation on earnings can become large and inflexible difficult to terminate and could experience conflict with board of directors
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