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Midterm #2 review All the information starting from the first midterm till the last lecture

Course Code
Jim Mc Cutcheon
Study Guide

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Legal Forms of Ownership:
Sole proprietorship:
o Business owned by one person
o Easy to form and dissolve, owner has sole claim of profit
o Quick decision making, high levels of secrecy
o Unlimited liability, difficult to raise capital
o Business owned by two or more people
o Formed by an agreement, either verbal or written
o General-all partners have joint liability
o Limited-limited partners not active in management
o Easy to form, large availability of capital
o Unlimited liability, potential managerial conflicts
o Difficult to withdraw one’s investment
All profits are taxed with personal tax rates, which is progressive
Private corporation:
o Must have less than 50 shareholders, shares can’t be offered to public
o Limited liability, secrecy
o Difficult and costly to form, management limitations
o 15.5% on first $500 000, dividends taxed twice
o Dividend-25%gross up, 13.33%fed credit, 4.5%prov credit
Public corporation:
o Limited liability, easy to obtain capital, great efficiency of
o Loss of secrecy, increased record keeping, lack of personal
involvement of employees
o Dividend tax rate of 44%grossup, 18%fed credit, 6.4% prov credit
Only assets from business can be liquefied in case of bankruptcy
Business taxed separately, based on corporate tax law
Forming a Corporation:
Federal incorporating:
o Fee of $200
o Carry on business, and head office anywhere in Canada
o Annual filing fee of $40
o Automatically given business # and HST#
Provincial incorporating:
o Fee of $300
o Carry on business, and head office anywhere in Ontario
o No annual filing fee
o Must apply for business # of HST#
Articles of Incorporation:

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o Proposed corporate name, choose ltd or inc etc.
o NUANS search, $20
o Description of business activities, number of directors, address
Corporate Structure:
Corporate governance-set of processes, policies & procedures that determine
how a corporation will be administered and controlled on behalf of
Shareholders elect board of directors who select or terminate top managers
Are Corporations Democratic?
Corporations are not as democratic as the corporate structure tries to show
Nature of Corporate Voting (large public corporations)
1. Occurs prior to annual meeting
o In mail receive packet of info
2. Decisions
o Many do not attend meeting and give vote up by proxy
o Voting by proxy is giving vote up to board of directors
o Proxy-card allows you to either agree or withhold vote
3. Voting Systems
o Majority: one vote per share, can not allocate votes, makes it easy for
management to elect entire board
o Cumulative: number of votes=(# of shares)(# of seats available on b of d)
Can allocate votes, much fairer way of voting, easier for dissident
minority to have a representation on the board
Ethical responsibilities are subjected to harsh scrutiny by government,
investigators, fund managers, prosecutors, and media
Moral principles that guide individuals in the dealings with others and
provide basis for determining whether behavior is right or wrong
Ethical behavior shaped by: individual’s personal values, and social culture
How to determine ethical behavior:
Ethics as the law, religion, or common behaviour
Theory of rights or justice
Practical Managerial Approaches to Ethical Decisions:
1. Refer to rules, codes, and the law
2. Identify stakeholders and their interests
3. Apply the “gut check” test
4. Apply the golden rule test
5. Apply the universalization test
Guiding Employee Ethical Behaviour:
Hiring criteria
Role modeling of management, mission statements, code of conduct
Ethics booklets, ongoing ethics training
Traditional Viewpoint
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