Chapter 5: Forms of Business Ownership
5.1 Small Businesses
Small business: an independent business with fewer than 100 employees and revenue
less than 2 million.
Among Canadian small business, 25% are goodproducing and 75% are service.
Industries small businesses play important roles:
1. Noninstitutional health care
3. Accommodation and food
5.2 Contributions of Small Businesses to the Economy
Small businesses generate 29% of GDP, medium 14%, large 62%
Creating new jobs
Creating new industries (provide needed service to large corporations, change
in consumer preferences, sees a need for change)
5.3 Why Small Businesses fail
1. Management shortcomings
2. Inadequate financing
3. Government regulation
5.4 The Business Plan
o A formal document that details a firm’s goals, methods and standards.
Five main sections of a business plan:
1. Executive Summary
3. Financial Section
4. Marketing Section
5. Resumes of principles
5.5 Assistance for small businesses:
1. Business Development Bank of Canada (BDC)
BDC: a governmental agency that assists, counsels, and protests the interests
of small businesses in Canada.
2. Canada Small Business Financing Program (CSBFP)
Typical federal and provincial government assistance. When banks loans to
small businesses and is not paid back, the government will guarantee payment
for as much as 85% of the loan.
3. Business incubator
A local program designed to provide lowcost, shared business facilities to
small, startup businesses.
4. Private investors (Venture Capital)
5. Small Business Opportunities for women
One half of the SMEs in Canada have at least one female owner
5.6 Franchising Franchising: a contractbased business arrangement between a parent company
and a dealer, such as restaurant or a retailer.
• Canada second largest franchising industry in the world, just after the US.
• More than 100 billion in sales each year.
Lower risks Failure of either franchisee or
Quick startup franchisor can reflect and have
Existing brand recognition impact to another
Existing customers The franchisor loses control over
Opportunities for expansion (for every aspect of the business
Franchisees and franchisors must work together to maintain their good brand
5.7 Legal Structures
Sole proprietorships [most common, oldest, simplest]: A business ownership,
which the sole proprietor’s status as an individual does not separate from its status as
the business owner.
Partnerships: An association of two or more people who operate a business as co
workers under agreements.
Corporation: A legal organization whose assets and liabilities are separate from the
assets and liabilities of the owner.
Not for profit corporations: organizations whose goals are not pursuing a profit
(Canada has about 160,000 notforprofit; exempt from paying tax)
5.8 Public and Collective Ownership of Businesses
Public ownership: a government unit or agency owns and operates an organization.
Public ownership results when private sectors are unwilling to invest due to high risks
or not profitable. Ex. TTC
Collective (Cooperative) Ownership: The owners work together to operate all or part
of the activities in their firm or industry. Found mostly in agricultural businesses. Co
operatives allow small firms to pool their resources, share equipments and expertise,
and help each other through difficult times.
i.e. groups of customers can col