Lecture Notes – Session 7 – Business Organizations Overview Forms of Business Organization Sole proprietorship Partnerships o Historical development o Nature o Liability o Rights and duties o Dissolution o Limited partnership o Limited liability partnership Changes in business approaches have increased the number sole proprietorships in Canada 50% (9% of total work force) of self-employed Canadians work from their home. Why? Growth of Service Sector Growing Concern for the Environment The depletion of the ozone layer Toxic waste in our water systems Huge amounts of waste and garbage Business Opportunities We are encouraged to reduce, reuse & recycle – many businesses are rethinking how to dispose of their garbage Environmental consultants work with many companies advising them on how to safely dispose of toxic waste products. Which Type of business is most common? Which type of business has the largest sales volume?
Sole Proprietorship o A business where the sole owner is responsible for the management and the debts of the business Unlimited personal liability Limited ability to raise capital May require registration or license Discussion of Sole Proprietorships Sole Proprietorship Simplest form of business ownership One owner of a business Sole Proprietorship (over 1 million in Canada) Advantages Keep all the profits Make all the decisions You are your own boss (i.e Financial information can be kept secret. from competitors), but not the government Disadvantages Unlimited Liability Facing personal and financial risks and challenges on your own Borrowing money may be more difficult Huge time commitment Sole Proprietors Examples may include individuals who are: Artists Authors Carpenters Computer specialists Digital designers
Ecotourism guides Farmers Industrial designers Photographers Web designers Chefs or Bakers Hair stylists Business Names Act 2(2) No individual shall carry on business or identify his or her business to the public under a name other than his or her own name unless the name is registered by that individual. R.S.O. 1990, c. B.17, s. 2 (2). Sole Proprietorships Advantages Easy to start Little formality – but must maintain business records like any other business Simple to dissolve Simple book-keeping In-Touch with the customer Disadvantages Unlimited legal liability Net income taxed at personal marginal tax rate Financing is limited to the resources of the single owner Growth problems Illness / vacation problems Difficulty to market except very locally Sole Proprietorships – Characteristics Summarized Nature of the Business o A business owned and operated by one person o Legally inseparable from the person who owns and operates the business
- Spring '10
- Corporation, Types of business entity