FORMS OF BUSINESS - FORMS OF BUSINESS There are a number of forms of business that you are required to know They are 1 2 3 4 Sole proprietorships

FORMS OF BUSINESS - FORMS OF BUSINESS There are a number of...

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FORMS OF BUSINESS There are a number of forms of business that you are required to know. They are: 1. Sole proprietorships 2. Partnerships 3. Corporations 4. Franchises I teach forms of business from the point of view protection of the business owner(s) from liability. 1: SOLE PROPRIETORSHIP : This is the simplest and cheapest form of business to carry on. Here the business is carried on by one person who is responsible for everything . This individual, called a sole proprietor , runs the business, manages the business, and makes all business decisions . From a liability point of view, a sole proprietor is said to have unlimited liability . That is the sole proprietor is liable/responsible for all contracts entered into; for getting all licenses and certificates such as a retail sales tax license/certificate and is also responsible for payment of all taxes such as income tax, retail sales tax and G.S.T.. A sole proprietor is also responsible for a torts committed by his business or in the course of his business. Finally, if a judgment is obtained against a sole proprietor, the judgment creditor can look to the assets of the sole proprietor for collection of the judgment debt. Where the sole proprietor carries on the business in his/her own name, there is no need to register with the business name with the government. For example, if I carry on my law practice as Robert Levine solicitor, then I do not have to register the name with the government. However, if I carry on my business in a name other than my own name, then I must register the name under the Business Names Act of Ontario . From a liability point of view this business has the most liability. 2: PARTNERSHIP : Partnerships are governed by the Partnership Act of Ontario which defines a partnership as two or more individuals/people who carry on business with a view to profit. This means that the partners must carry on the business to make a profit. If they do not, then the business is not a partnership. For example, consider A and B carry on a business which is a charity. Since charities do not generate a profit, A and B cannot carry on the charity as a partnership. There are three types of partnership: General Partnership, Limited Partnership and Limited Liability Partnership. a) General Partnership : This form of partnership is carried on by two or more individuals with a view to profit. First, it is relatively cheap to start up such a partnership. In a general partnership, each partner is considered to be the agent of the other partners and his/her acts can bind the other partners. For example, A, B and C are general partners and without the knowledge of B and C, A enters into a contract in the course of business of the partnership. The contract that A has entered into will bind A’s partners, B and C who, like A will be liable if the contract is not performed. Also in such a partnership, partners are liable for the torts committed by one of the partners in the ordinary course of business of the partnership. Partners in a general
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  • Spring '10
  • JoshuaSera
  • Business, Corporation, Types of business entity, Limited Partnership and Limited Liability Partnership

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