| Sole Proprietorship: | a business that is owned, and usually managed, by one person |
| Partnership | a legal form of business with two or more parties. |
| Corporation: | a legal entity with authority to act and have liability separate from its owners |
| Advantages to Sole Proprietorship | •Ease of starting and ending
•Be your own boss
•Pride of ownership
•Retain profit
•No special taxes – profits taxed as personal income
•Less regulation |
| Disadvantages to Sole Proprietorship | •Unlimited liability
•Limited financial resources
•Difficulty recruiting for needed skills
•Overwhelming time commitment
•Few fringe benefits
•Limited growth
•Limited lifespan
•Possibly pay higher taxes |
| General Partnership | A partnership in which all owners share in operating the business and in assuming liability for the business’s debts |
| Limited Partnership | A partnership with one or more general partners and one or more limited partners. |
| Partnership Advantages | •More financial resources
•Shared management and pooled, complementary skills and knowledge
•Longer survival
•Shared risk
•No special taxes
•Less regulations than a corporation |
| Partnership Disadvantages | •Unlimited liability
•Division of profits
•Disagreements among partners
•Difficulty of termination
•Possibility of higher taxes |
| Corporation | a federally or provincially chartered legal entity with authority to act and have liability separate from its owners (stockholders/shareholders) . |
| Private corporation: | is usually controlled by a small number of shareholders and it shares are not listed on a stock exchange |
| public corporation: | has the right to issue shares to the public, so its shares may be listed on a stock exchange |
| Corporation Advantages | •Limited liability
•Public Corporation: More money for investment
•Size: may be larger due to increased resources
•Perpetual life•Ease of ownership change
•Ease of attracting talented employees
•Separation of ownership from management |
| Corporation Disadvantages | •High initial costs
•Extensive paperwork
•Double taxation
•Two tax returns
•Size: may become too inflexible to new ideas
•Termination difficult
•Stockholder and board conflict |
| Articles of incorporation: | a legal authorization from the federal or provincial/territorial government for a company to use the corporate format |
| Franchise agreement: | an arrangement whereby someone with a good idea for a business sells the rights to use the business name and sell its goods and services in a given territory. |
| Franchisor: | a company that develops a product concept and sells others the rights to make and sell the products. |
| Franchise | the right to use a specific business’s name and sell its goods and services in a given territory |
| Franchisee: | a person who buys a franchise |
| Franchises Advantages | •Management and marketing assistance
•Personal ownership
•Nationally recognized name
•Financial advice and assistance
•Lower failure rate |
| Franchises Disadvantages | •Large start-up costs
•Shared profit
•Management regulation
•Coattail effects
•Restrictions on selling
•Fraudulent franchisors |
| Co-operative: | an organization owned by people-producers, consumers, or workers-with similar needs who pool their resources for mutual gain, e.g, credit unions |
| How do Co- operatives work | Purpose: meets the common needs of their members
Control Structure: one member/one vote system
Allocation of Profit: profits are shared among their member-owners on the basis of how much they use the organization, not on how many shares they hold |
