Chapter 4 study notes

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Published on 30 Jan 2011
School
Course
Professor
Business Management
_____________________________ Chapter 4
There are usually 4 types of legal ownership for businesses:
The Sole Proprietorship
A business owned and operated by one person.
Majority of businesses in Canada
Business and owner are one legally
Advantages
Freedom: dont need to answer to anyone but themselves
Simple legal setup: registration is not required.
Tax benefits: losses in early stages can be deducted from income (one legal entity).
Disadvantages
Unlimited liability: Personal liability for all debts of the business
Lack of continuity: legally dissolves when owner dies
Depends of resources of one person (managerial and financial limitations)
Difficulty borrowing money from banks
The Partnership
2 or more persons agree to combine money, managerial and technical abilities to
operate a business for profit
Two types:
oGeneral Partnerships: all partners share in profits, managing the business,
unlimited liability for all partners
oLimited Partnerships: at least one general partner (run the business and
have unlimited personal liability for debts) and one or more limited
partners (no say in managing the business and not personally liable for
debts loses only initial investment).
Advantages
Easier to borrow funds
Able to invite new partners to join business (ability to grow by adding talent and
money)
Few legal requirements (private agreement between partners)
Taxed as individuals (not regarded as legal entities)
Disadvantages
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Document Summary

There are usually 4 types of legal ownership for businesses: A business owned and operated by one person. Freedom: don"t need to answer to anyone but themselves.  simple legal setup: registration is not required. Tax benefits: losses in early stages can be deducted from income (one legal entity). Lack of continuity: legally dissolves when owner dies.  unlimited liability: personal liability for all debts of the business.  depends of resources of one person (managerial and financial limitations) 2 or more persons agree to combine money, managerial and technical abilities to operate a business for profit.  able to invite new partners to join business (ability to grow by adding talent and money) Taxed as individuals (not regarded as legal entities)  difficulty in transferring ownership: may not sell out without other partners". Lack of continuity (even if only one partner pulls out/dies) consent.

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