Textbook Notes (368,122)
Canada (161,660)
MGTA02H3 (363)
Chapter 4

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Management (MGT)
Chris Bovaird

Chapter 4 – Understanding Legal Forms of Business Organization - four legal ownership  the sole proprietorship, partnership, the corporation, the cooperative The Sole Proprietorship - sole proprietorship: a business owned and operated by one person - business is considered to an extension of yourself (not a separate legal entity) - majority business in Canada are sole proprietorship Advantage - freedom - answer to themselves b/c they do not sure ownership - easy to form - put sign on door and open business - low start-up cost - tax benefits - is legal, so looses can be deducted from income to propriety earns from personal sources other than the business Disadvantage - unlimited liability: personal liability for all debts of the business - lack of continuity – A sole proprietorship legally dissolves when owner dies - depends on the resource of one person who managerial and financial limitations my constrain the business The Partnership - partnership: formed when two or more person operate a business for profit - two types of partnership  General partnership: a type of partnership which all partners are jointly liable for the obligations of the business  Limited partnership: a type of partnership with at least one general partner (who has unlimited liability) and one or more limited partners. The limited partners cannot participate in the day-to-day management of the business or they risk the loss of their limited liability status  General partners: partners who are actively involved in managing the firm and have unlimited liability  Limited partners: partners who don’t participate actively in the business and whose liability is limited to the amount they invested in the partnership Advantage - Ability to grow by adding talent and money - Easier to borrow funds - Can invite new partners to join by investing money - Agreement can be written, oral, or even unspoken - Partnership agreement is a private document - Now law require partners to file an agreement with some government agency - Partners are taxed as individuals Disadvantage - Unlimited liability is drawback of a general partnership - By law, each partner is liable for all debts incurred in the name of the partnership - Lack of continuity – one dies/pulls out partnership dissolve legally - Difficulty of transferring ownership (must have consent of two partners) - Partnership has little/no guidance in resolving conflict btwn partners The Corporation - All corporation share: legal status as a separate entity, property rights and obligations, and an indefinite lifespan - “an artificial being, invisible, intangible, and existing only in contemplation of the law” - Corporation: separate legal entity that is liable for its own debts and whose owners’ liability is limited to their investment - Shareholders: person who own shares in a corporation; buys shares of a corporation (real owners of corporation) - Board of directors: a group of individuals elected by a firm’s shareholders and charge with overseeing, and taking legal responsibility for, the corporation’s actions  Governing body of a corporation  Make sure corporation is running
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