Textbook Notes (367,752)
Canada (161,368)
Management (806)
MGM101H5 (354)
Chapter 4

CHAPTER 4 - FORMS OF BUSINESS summary

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Department
Management
Course
MGM101H5
Professor
Dave Swanston
Semester
Fall

Description
Chapter 4 Notes A sole proprietorship (easiest to set up) is one person owning and operating a business, without forming a corporation. Partnership: a legal form of business with two or more parties. The business can be a partnership of individuals, corporations, trusts, other partnerships, or a combination of these. Corporation: a legal entity with authority to act and have liability separate from its owners Liability: for a business, it includes the responsibility to pay all normal debts and to pay because of a court order or law, for performance under a contract or payment of damages. Advantages of a Sole Proprietorship: 1. Ease of starting and ending the business 2. Being your own boss 3. Pride of ownership 4. Retention of company profit 5. No special taxes 6. Less regulation Disadvantages of a Sole Proprietorship (Often it is difficult to save enough money to start a business and keep it going. The costs of inventory, supplies, insurance, advertising, rent, computers, utilities, and so on may be too much to cover alone): 1. Unlimited liability – the responsibility of business owners for all of the debts of the business 2. Limited financial resources 3. Management difficulties 4. Overwhelming time commitment 5. Few fringe benefits 6. Limited growth 7. Limited lifespan 8. Possibly pay high er taxes Partnerships: 1. General partnership: A partnership in which all owners share in operating the business and in assuming liability for the business’s debts. General Partner – an owner that has unlimited liability and is active in the managing firm 2. Limited Partnership: a partnership with one or more general partners and one or more limited partners. Limited Partner – an owner who invests money in the business but does not have any management responsibility or liability for losses beyond the investment Advantages of a Partnership (Some professionals who enjoy the advantages of partnerships today are physicians, lawyers, dentists, and accountants.): 1. More financial resources 2. Shared management and pooled/complimentary skills and knowledge 3. Longer survival 4. Shared risk 5. No special taxes 6. Less regulation Disadvantages of Partnerships (Partnerships have caused splits among families, friends, and marriages): 1. Unlimited liability 2. Division of profit 3. Disagreements among partners 4. Difficult to terminate 5. Possibly pay higher taxes Partnership agreement: legal document that specifies the rights and responsibilities of each partner Corporations: a federally or provincially chartered legal entity with authority to act and have liability separate from its owners · Public Corporation: corporation that has the right to issue shares to the public, so its shares may be listed on a stock exchange. · Private Corporation: not allowed to issues stock to the public, so its shares are not listed on stock exchanges; it is limited to or fewer shareholders. Advantages of a corporation 1. Limited liability 2. More money for investment 3. Size 4. Perpetual life 5. Ease of drawing talented employees 6. Separation of ownership from management Disadvantages of Corporations: 1. Extensive paperwork 2. Double taxation 3. Two tax returns 4. Size 5. Difficulty of termination 6. Possible conflict with stockholders and board of directors 7. Initial cost A professional corporation is a Canadian- controlled private corporation engaged in providing professional services. A non-resident corporation conducts business in Canada but has its head
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