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Chapter 8

MGTA01H3 Chapter 8: mgta01 chapter 8

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Management (MGT)
Chris Bovaird

Chapter 8: Limited Partnerships, Corporations and Co-ops Business Structures That Allow For Many Owners • for some, the downside of having more partners is that decision-making authority must be more widely shared. • In addition, partners are jointly and severely liable for each other’s business-related debts and obligations • these considerations tend to place a practical limit on the size of most general partnerships • Limited Partnerships: A form of partnership that allows for two classes of partners: general and limited partners • a limited partnership must have at least one partner (there can be more) in limited partnerships, a general partner is sometimes referred to as the principal • • principal: an individual who has authority to hire, and instruct other to act on half of a business and who bears the liability and responsibility • In contrast to the general partner, a limited partner is an individual who puts capital into a business and shares in the profit but takes no role in the day-to-day management or decision making • A limited partnership is a an appropriate way to organize a business if one or more of the general partners has the skills, qualifications and experience to run a business but lacks sufficient capital (might be reluctant to invite more general partners because they means more people involved in controlling the business) • In order to create a limited partnership in Ontario, the general partner(s) must comply with the Limited Partnership Act (must submit this form to the Ontario Registrar of Business names which places a few restrictions on he name the business can give to itself and most important forbids a limited partner from working in a managerial or decision making capacity) • limited liability: an individual’s responsibility or obligations relating to a business is limited to the amount of capital that they provided. If the business is sued, someone with limited liability can lose only the value of his or her capital • the general partner however remains unlimitedly liable • limited partnerships are often used when the business is focused on a single or limited duration project • i.e. making of a film (the general partner has the skills and experience but lacks the capital and therefore seek out a limited partner to pitch in money for exchange of a share of profits) • Read page 152-153 for example Corporations: • corporations are often referred to as “artificial beings” (corporation is an entity that is created by law and has many responsibilities just like human beings) • corporation: a legal entity created to own and operate a business, which ha the most of the same rights and responsibilities as a human being • recently, the Supreme country of the United States of America rules that corporations are “persons”; In the UK (city of London) corporations have the right to vote • A corporation is literally the embodiment of the entrepreneurial spirit, the effort and the capital of the people who collaborate to create it How Corporations are Created corporations come to existence when one or more individuals conceives of a business • enterprise and then looks for the most appropriate way to create it • the law therefore makes provision for people to come together and make applications to the government for the creation of a corporation • in order to create a corporation a number of forms need to be completed and some fees need to be paid (not to complex and fess only a few hundred dollars) • Incorporators: the individuals who create a corporation incorporators can apply to create a corporation in any of the Canadian provinces and terrors • or it can be created as a federal corporation (typically created in the province that the incorporators live and intend to operate the business) • provincial corporations can only carry business in the province/territory of incorporation (i..e Ontario corporation can only operate in Ontario; if it wants to expand to Quebec it needs to do paperwork) • Federal corporations have the ability to carry business anywhere in Canada The essential steps for creating a corporation are: • choose a corporation name (cannot use words that imply that the business is connected with the Crown, the Government of Canada or any provincial/territorial government) • Conduct a name search (confirm that no business has the same/similar name; Ontario uses the NUANS database to confirm) • complete the articles of incorporation - articles of incorporation the document that provides basic information that must be submitted to the relevant jurisdiction in order to create a corporation. Contains the following information: - the location of the corporation’s registered office - any restriction on the types of activities that the corporations can conduct - the number of shares to be sold to investors, once the corporation is created submit the paperwork and pay the fee • • the province issues the certificates of incorporation • the certificates of incorporation: the birth certificate of the Corporation. The government’s authorization that a legal organization has been created, which conducts a business under its own name. Ownership of a corporation-shares and shareholders • share: an ownership stake in a corporation. The owner is entitled to a share of the corporation’s profits • typically, one acquires shares by contributing capital to a corporation. However, the founders and employees of a corporation may receive shares as reward or compensation for services. (see page 157 for picture of certificate) • shareholder: any individual or organization who owns shares in a corporation • reader pages 158-159 for example (main point is that incorporators can agree that shares can can be given in exchange for work done, or services performed) Corporations-Permanent Existence: • an important feature of the corporation is that if the original entrepreneurs or investors depart, the corporations as a distinct legal entity can continue • Canada’s oldest corporation= the Hudson’s Bay Corporation Organizing the Corporation-Directors and Officers: • directors: individuals elected by the shareholders of a corporation to represent their interests and to administer the affairs of the corporation • board of directors: the collective group elected by the shareholders of a corporation to re
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