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COMM 103 Reading Notes.docx

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Queen's University
COMM 103
Gregory Libitz

COMM 103 Reading Notes Chapter 13 Introduction to Capital and Financial Markets Business Ownership Options 1. A key initial decision associated with the formation of a business is the type of legal structure to be utilized in order to enable the individual, or individuals, to commence business operations 2. Five factors that will influence legal structure decision: Ease of Set-Up, Degree of Control, Magnitude of Risk, Financial Capacity, and Required skills 3. As the needs of the organization change, or the level of risk magnifies, the need to adjust the business organization’s legal structure may be in the best interests of all those involved. Sole Proprietorships 1. It refers to a business that is owned by one person and that is initiated without a requirement to create a separate legal entity. 2. Advantages: beyond the simplicity of the commencement of the operations, is that the sole proprietor has 100 percent control of the business with regard to ownership and in making decisions relating to the business. 3. Risk Issues: the sole proprietor is 100% personally exposed to the liabilities to the skills possessed by the sole proprietor. They are limited to their won personal capacity to invest and/or borrow money in support of the business organization. Partnerships 1. Partnership is a business organization that is formed by two or more individuals 2. Partnership Agreement is a written agreement among the partners that outlines the expectations of each partner and details how the partnership is going to work. This agreement ensures that the expectations of each partner and the details of how the partnership is going to work are fully understood by all partners involved; it outlines the percentage of ownership that is attributed to each partner. 3. Joint and Several Liability refers to the liability obligation of partners as the result of a legal contract. Partners can be held individually liable for their share of the obligation (several), or fully liable for the full obligation (joint) in the event that the other parties to the agreement are unable to pay their obligations. 4. Limited Liability Partnership is a partnership that is made up of both general partners (at least one) and limited (passive) partners. Limited partners are individuals who contribute equity capital to the organization, but are not actively involved in the management of the business operation and have minimal control over daily business decisions. 5. Advantages VS Disadvantages see Textbook. Pg 356 Corporations 1. It is a business entity that, legally, is separate and distinct from its owners. 2. Incorporation is the legal process of setting up a corporation. It can be done at either the provincial or federal level. 3. Board of Directors is an appointed or elected body of a for-profit or not-for- profit corporation that oversees and advises management on issues challenging the organization on behalf of its stakeholders and shareholders. 4. Advantages: limited liability; ownership rights are clearly defined and are based on the percentage of stock owned by its owners; the ability to issue shares of stock; be eligible for many deferral government programs and to take advantage of tax incentives relating to capital gains exemptions and small business deductions. (Other pros and cons can be seen in Textbook on pg 358). 5. Private Corporations are corporations whose ownership is private. The shares of stock of the corporation are not p
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