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MGTA01H3 (583)
Chapter 4

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University of Toronto Scarborough
Management (MGT)
Bill Mc Conkey

MGTA03 – READING NOTES –CHAPTER 4  Sole proprietorship: a business owned and operated by one person o Advantages  Freedom, easy to form  Answer to no one but themselves since they don’t share ownership  Tax benefits, all profits are all going towards the owner o Disadvantages  Unlimited liability: personal liability for all debts of the business  Lack of continuity: once the owner dies, te business legally dissolves  Depends on the resources of one person, whose managerial and financial limitations may constrain the bussines  Partnership: a from of organization established when two or more persons agree to combine their financial, managerial, and technical abilities for the purpose of operating a business for profit o General partnerships: a type of partnership in which all partners are jointly laibale for the obligations of the business o Limited partnerships: a type of partnership with at least one general partner (who has unlimited liability) and one or more limited partners. The limited partners cannt participate in the day-to-day management of the business or they risk the loss of their status o General partners: partners who are actively involved in managing the firm and have unlimited liability o Limited partners: partners who don’t participate actively in the business and whose liability is limited to the amount they invested in the partnership o Advantages  Ability to grow by adding talent and money  The ease to borrow funds  Abilitiy to invite partners to join by investing $ o Disadvantages  Unlimited liability  Lack of continuity (when a partner dies or pulls out, a paternership dissolves legally even if the other partners agree to stay)  Transferring ownership (no partner may sell out without the other partners consent)  Little or no guidance in resolving conflict between the partners  Corporation: separate legal entity that is liable for its own debts and whose owners’ liability is limted to their investment o Shareholders: person who own shares in a corporation o Board of directors: a group of invividuals eleced by a firm’s shareholders nad charged with overseeing, and taking legal responsibility for, the corporation’s actions o Inside directors: members of a corporation’s board of directors who are also full-time employees of the corporation o Outside directors: members of a corporations board of directors who are not also employees of the corporation o CEO (Cheif Executive Officer) the
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