Textbook Notes (362,882)
Canada (158,081)
MGTA01H3 (583)
Chapter 4

Chapter 4 In Class + Reading Notes

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University of Toronto Scarborough
Management (MGT)
Chris Bovaird

Chapter 4 – Understanding Legal Forms of Business Organizations Monday October 24 , 2011 - A productive company: smartest people, know how to mobilize resources (productive) - Contributing factor that makes a country rich 3 forms of organization 1) Sole Proprietorship 2) Partnership 3) Corporation Sole Proprietorship - easiest way to start a business - most common - makes all decisions - keeps all profits - responsible for all debts - operated by 1 person - Eg. babysitting, dog walk, shoveling snow Advantages - easy to set up - no regulatory requirements - no mandatory accounting needs (don’t need to tell anyone) - cheap to set up - $60~$70 if registered (want copyright on your business name) - $0 is not registered Disadvantages - limits to owner’s skills - lack of continuity (if owner dies) - limits to owner’s resources - hard to get finance (bank loans) - finance with own money - personal and limited liability (can be sued for as much as they want) Partnership Operated by 2 or more people (acting together) Advantages - more resources (human and finance) - more creditability - more contacts (potential customers) - lack of legal standing means they are taxed as individuals Disadvantages - conflict between ownership - lack of continuity (even if partner dies an you want to continue, not possible by law) - personal liability - unlimited liability - joint and several liability (responsible for debts of partnership even if not incurred by you, if sued, both of you are used even if it’s not your fault) Partnership Agreements - agreement between partners normally include: - Between partners only. Not binding on others 1) how much $$$ each member contributed 2) what each partner must do 3) how profits are divided Two types of Partnerships: 1) General Partnership Share ownership and management 2) Limited Partnership - limited partners take no part in management of business - supply $$ only, only lose their investments (limited liability) - two types of partners in this:  general partners: actively involved in managing the firm + unlimited liability  limited partners: not involved, liability limited to amount invested in business (can’t be liable for general partner’s mistakes) Corporations - requires paperwork and fees - For businesses that want: - larger number of owners - split between ownership / management - limited liability for owners - legal entity, authorized to operate a business - responsible for its own debts - owned by shareholders with l
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