BU111 2nd half - Oct 24 Forms of Business Ownership...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Oct 24 Forms of Business Ownership Unincorporated Sole Proprietorship – an unincorporated business owned and operated by one person for his or her private profit Partnership – an unincorporated business operated by more than one individual for their private profit Incorporated Public – can sell and distribute shares to the public Private – cannot sell and distribute shares to the public Legalistic Distinction Unincorporated – in the eyes of the law the owner and the business are viewed as one in the same Unlimited Liability in unincorporated businesses – personal assets can be liquidated to cover debts Incorporated – In the eyes of the law incorporated businesses possess all legal rights as a person and are thus a new legal entity. Limited Liability in incorporated businesses – only the assets of the business can be used to cover debts Tax on Business Income Unincorporated vs. Incorporated businesses Unincorporated businesses (proprietorship and partnerships) are taxed on the basis of personal tax law (progressive system) Corporations are taxed on the basis of Corporate Tax Laws (fixed rate system) Private corporations are taxed at a lower fixed rate than public corporations due to the mall business tax deduction Tax comparison : public corporation vs. Proprietorship Assume $750000 in profit Public Corporation = $270900 in tax Sole Proprietorship/Partnership = $332,428 Private Corporation = 217,245 Tax differential by incorporating (private vs. remaining unincorporated = 115, 183 Corporate Tax Rates – Small business Rate on first $400,000 Small business tax rate RULES Must be Canadian controlled private corp’n Must retain earnings to retain savings Rates change for income above $400,000 Oct 31 When do you incorporate from a tax perspective? Two Answers: Individual earns all of his/her income from their business o 2007 Fed 0 – 37178 15.5% o Ont 0 – 35488 6.05%
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
o 21.55% o 2008 Fed 0 – 38000 15% o Ont 0 – 26000 6.05% o 21.05% o Compare Individual (Prop/Part) and Private Corp Individual 47,600 – 9,600 tax free = 38,800 X 21.05% 7,999 62 8,061 Private 47600 X 17% 8,092 Working for someone else o If your Business is losing money (-5000) all losses can be used as an expense or tax deduction on your taxable income from your other jobs Types of Ownership (compare and contrast EXAM) Maybe mini case study write up a recommendation for type of business ownership Sole-Proprietorship Advantages o Easy to start and easy to dissolve o Total claim on all profits and losses o Tax advantages (deduct losses against taxable income) o Maximum levels of secrecy Disadvantage o Unlimited liability o Lack of continuity ( if you get sick or something happens to you, if you are away from the business the business fails) o Limited capital of financial resources (lack of available capital o Management limitations (don’t have all the skills of all aspects of management)
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 10/15/2011 for the course BUSINESS Bu481 taught by Professor Trucker during the Spring '11 term at Wilfred Laurier University .

Page1 / 18

BU111 2nd half - Oct 24 Forms of Business Ownership...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online