Textbook Notes (368,432)
Canada (161,877)
Finance (37)
MGFB10H3 (19)
Derek Chau (11)
Chapter 2

Chapter 2 Notes

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Derek Chau

Chapter 2 Business (Corporate) Finance Notes 2.1 Types of Business Organizations Sole Proprietorships sole proprietorship a business owned and operated by one person the big advantage is that setting one up is easynon paperwork is involved and the owner needs only to start doing business unlimited liability the liability not only for what is invested in the business but also for any other assets owned the sources of finances available for sole proprietorships are the same ones that are available to individuals if businesses create some revenue, owners can use one of the many government programs designed to stimulate small businesses there is no continuity in a sole proprietorship, which makes it difficult to sell, and it dies with the owner because legally a sole proprietorship is inseparable from the individual owner, the owner has to report the income to the Canada Revenue Agency (CRA) on an annual income tax return Partnerships partnership a business owned and operated by two or more people this partnership can be formalized by having a lawyer create a partnership agreement, which formalizes how decisions are made there are two types of partnerships: limited liability partnerships (LLP) and limited and general partnerships LLPs are the new form of organization for professional firms, where each partner has limited liability in the event of a lawsuit against the firm; however, each partners income is still included as ordinary income and filed by using an individual tax return limited and general partnerships are generally used for tax reasons in this case, a general partner operates the business and limited partners are passive investors as long as the limited partners are not active in the business, they have the advantage of limited liability limited liability the liability for only the initial investment in a limited and general partnership the general partner, conversely, has unlimited liability as the operator of the business Trusts trust a legal organization in which assets are owned and managed, or controlled by different parties the use of trusts has recently expanded from personal finance and mutual funds to income and royalty trusts, which have become very important in the Canadian financial system over the past decade income and royalty trusts trusts set up to invest in the shares
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