MGTA02H3 Chapter Notes -Legal Personality, Sole Proprietorship, General Partnership

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Published on 27 Jun 2012
School
UTSC
Department
Management (MGT)
Course
MGTA02H3
Professor
Chapter 4: Understanding Legal Forms of Business Organization
ORGANIZING OPTIONS (FORMS OF BUSINESS OWNERSHIP)
The Sole Proprietorship Business owned by one person (considered
extension of self not separate legal entity)
o Advantages
Freedom
Simple legal setup
Low start up costs
Tax benefits
o Disadvantages
Unlimited liability personal liability for all debts of the
business
Lack of continuity (dissolves when owner dies)
Dependent on resources of one person (hard to get cash
funding from others)
The Partnership Two or more persons combine financial, managerial and
tech abilities for the purpose of operating a business for profit
General Partnerships Partnership n which all partners are jointly liable for
the obligations of the business (All unlimited liability; Share all profit)
Limited Partnership Partnership with at least one general partner (who has
unlimited liability) and one or more limited partners. Limited partners
cannot participate in the day to day management of the business or they risk
the loss of their limited liability status.
o Advantages
Ability to grow by adding talent and money
Easier to borrow funds
Ability to invite new partners to join by investing money
Simple legal setup
Partnership agreement
o Disadvantages
Unlimited liability for general partnership (If other partner
caused debt, other one still has to pay)
Lack of continuity (death; partnership dissolves)
Difficulty of transferring ownership (no partner can sell out
without other partners consent)
Conflict b/w partners
The Corporation - Legal status as a separate entity that is liable for its own
debts and whose owners liability is limited to their investment
Shareholders Investors who own shares in a corp
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Document Summary

Chapter 4: understanding legal forms of business organization. The sole proprietorship business owned by one person (considered extension of self not separate legal entity: advantages. Unlimited liability personal liability for all debts of the business. Lack of continuity (dissolves when owner dies) Dependent on resources of one person (hard to get cash funding from others) The partnership two or more persons combine financial, managerial and tech abilities for the purpose of operating a business for profit. General partnerships partnership n which all partners are jointly liable for the obligations of the business (all unlimited liability; share all profit) Limited partnership partnership with at least one general partner (who has unlimited liability) and one or more limited partners. Limited partners cannot participate in the day to day management of the business or they risk the loss of their limited liability status: advantages. Ability to grow by adding talent and money. Ability to invite new partners to join by investing money.

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