Week5- Law 122 Chapter 21.docx - Week 5 Chapter 21 Business...

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Week 5 Chapter 21 Business Organizations Sole Proprietorship The typical mom n pop type of shop Small shop (babysitting, grass cutting, snow shovelling It arises as soon as you start No separation between you and your business You are entitled to all income (responsible for all losses on personal income) Liable for all obligations (dropping the child during babysitting) Your assets are available to satisfy all the debts of your business (taxes, you accidentally mow someones prized rose bush you are liable) Very easy to start. Can be advantageous in a tax perspective Can raise money in personal borrowing But you have to raise it all yourself. Legal Requirements No formal registration as "sole proprietorship" is required (compare this to incorporation, where formal steps are required But sole proprietors must comply with general requirements imposed on all businesses E.g may need to register a "doing business as" (DBA ) name E.g may need to acquire a particular licence, e.g hot dog vendor permit or spectrum licence Sole Proprietor Advantages and Disadvantages Advantage Disadvantage Simple to start; simple to administer Possible tax advantages Unlimited person liability Can only raise money by personal borrowing As the business grows, these problems continue to grow All in all A sole proprietor is best suited for small businesses Partnerships: typology Three main types Partnership Limited liability partnership --> doctors, engineers, regulated professional they have professional negligence responsibilities they use limited liability to restrict the amount of the negligence of their partners. LLP partners risk the investment of their own personal negligence, not their partners Limited partnership --> RESTAURANTS restaurant investors risk what they put in and no more General Partnerships Exists when two more people carry on business together with a view to profit (Two
people get together with a view to making money) Share responsibilities contribute and share profits It is automatic when the activities begin no legal formality for the partnership to start Statue sets out default rules Unless u have a partnership otherwise BEWARE:

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