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Unformatted text preview: MCS*3040- Business and Consumer Law CHAPTER 14- BUSINESS FORMS AND ARRANGEMENTS Forms of Business Organization- business for is critical decision affects ; - who is financially liable for business- shares in business profits and other assets - makes and is accountable for management decisions the sole proprietorship sole proprietorship: an unincorporated business organization that has only one owner.- oldest and one of most common forms- simplest in legal perspective cause no legislation pertaining to sole proprietorship- legal consequences really pertain to rights and liabilities of an individual Financial liability- not legally capable of borrowing money on its own- in event of breach of contract, owner is liable ; unlimited liability Unlimited liability: unrestricted legal responsibility for obligations Profit sharing- bears risk of failure, but enjoys all profits ( after taxes accrued) Decision Making - no partners or board of directors to report to- thus able to make business decisions quickly and independently - lots of personal freedom to do as pleases concerning all aspects of business- should owner die, business terminated; has limited life span Disadvantages:- large responsibility - must multitask - so much of enterprise revolves around individual ; what happens on even individual is incapable of carrying on work? - Employees have limited opportunities for advancement ; workers might not be motivated no level of high commitment Sources of Capital - limited access to capital ; limited to own asset and self drawn credit; usually less than what could be available if more than one person involved Taxation- because not legal entity separate from owner, no formal or specialized tax rules that - profit and losses recorded on personal tax income; might be favorable dependent on taxpayers circumstances transferability - cannot be transferred or sold to another because sole proprietorship as no legal status; nothing to transfer - but assets associated with sole proprietorship can be transferred or sold regulations - legal requirements for establishing and conducting sole proprietorship minimal; just commence business actively , no need to insure legal fees- simple and inexpensive - subject to some general legislation as any other business form. E.x. registration and licensing of business - name registry; failure to register name could result in fine or other penalty - also subject to laws of general application the partnership partnership: a business carried on by two or more persons with the intention of making a profit - similar to sole proprietorship such that no legal personality or legal existence separate from those who comprise them- no special steps taken- legal relationship automatically arises when 2 or more people do business together - rules that given partnerships come from 3 sources 1.) partnership legislation ( every province ) 2.) contract law 3.) agency law Financial Liability - each partner is fully responsible for all debt and obligations; joint liability...
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- Winter '11