2. Forms of Business Ownership (Part I) Flashcards
What is a sole proprietorship?
An enterprise or a business venture by one single individual
What does it mean to conduct business?
- Offer goods & services
- More than one transaction
Who must register with the Registraire des Entreprises? (sole proprietorship)
Mandatory registration if using a business name (s. 21(1) ALPE)
Optional registration registration if using first & last name (s. 21(1) ALPE)
*Exception: registration mandatory if operation tobacco retail sales outlet or an artificial tanning salon (ss. 21 para. 2(1) & para. 2(2) ALPE)
*Optional registration for natural persons using a pseudonym in pursuit of an artistic, literary or other cultural activity (s. 23 ALPE)
Where can we find the requirements to select a business name? (sole proprietorship)
Name a few.
s. 17 ALPE
Look at image for criteria.
SP: Start-up
When must the declaration of registration be submitted?
Declaration of registration must be filed no more than 60 days after the date on which registration becomes compulsory - s. 32 ALPE
Declaration of registration must be filed no more than 30 days after the date of which registration becomes compulsory in the case of a tobacco retail sales outlet or an artificial tanning salon*
* The 30 day registration requirement is found in the Tobacco Control Act and the Act to prevent skin cancer caused by artificial tanning, respectively
The declaration must be updated annually, even if there are no updates - s. 45 ALPE
SP: Start-up
What information must be stated in the registration declaration?
Detailed in s. 33 of ALPE
Look at image for details.
SP: Start-up
How much does registration cost?
What is the annual registration fee?
What is the fee to update the annual declaration?
How much does registration cost?
$37 (regular) OR $55 (priority)
What is the annual registration fee?
$37
What is the fee to update the annual declaration?
No cost OR $18.50 (priority)
Discuss liability when it comes to a sole proprietorship.
There is no distinction in law between the sole proprietor and their business
The sole proprietor is responsible has unlimited personal liability for all debts
Discuss ownership of the sole proprietorship.
The sole proprietor owns 100% of their business
Discuss profits of the sole proprietorship.
The sole proprietor is entitled to all the profits
Profits are considered personal income and are taxed as such
Discuss management in the sole proprietorship.
The sole proprietor has complete managerial control over their business
Discuss the transfer of ownership in the sole proprietorship.
Ownership of a sole proprietorship cannot be transferred, BUT the assets can be sold
Discuss the termination of a sole proprietorship.
- Terminates when the owner dies
- Terminates when the owner stops doing business
- Must file a declaration of cancellation (no cost - regular; $18.50 - priority)
Enumerate the advantages and disadvantages of the sole proprietorship.
Advantages:
- Simple start-up
- Low start-up costs
- Easy to dissolve
- Complete control
Disadvantages:
- Unlimited liability
- Lack of continuity
- Financing difficulties
- Goodwill difficulties
What is a partnership?
An enterprise or a business venture by two or more individuals.
Part.: Start-up
Who must register?
What information must be stated in the registration declaration?
When must the declaration of registration be submitted?
Who must register?
Partnerships must file a declaration of registration
- s. 21(2) ALPE (see also art. 2189 of the CCQ)
What information must be stated in the registration declaration?
See ss. 33 and 34 of the ALPE
When must the declaration of registration be submitted?
Same timeframe as discussed for the sole proprietorship
Part.: Start-up
How much does registration cost?
What is the annual registration fee?
What is the fee to update the annual declaration?
How much does registration cost?
$56 (regular) OR $84 (priority)
What is the annual registration fee?
$56
What is the fee to update the annual declaration?
No cost OR $28 (priority)
Discuss partnership liability.
No distinction in law between the partners and the business
The partners have unlimited liability for the debts of the partnership
The partners are solidarily liable for the debts of the partnership (art. 2221 CCQ; see also art. 1523 CCQ)
The partners may come to an agreement that a given partner is not responsible for the debts of the partnership, but such an agreement is not enforceable against creditors (art. 2203 para. 2 CCQ)
Discuss ownership when it comes to a partnership.
The division of ownership is determined by the partners
The division does not have to be equal
Unless specified otherwise, it is presumed equal (art. 2202 CCQ)
Discuss the profits of a partnership.
No partner can be excluded from sharing in the profits (art. 2203 CCQ)
The share of profits is divided equally, unless specified otherwise (art. 2202 CCQ)
Profits are considered personal earnings and are thus taxed as such
Discuss a partnership’s management.
Unless stipulated otherwise, all the partners have the power to manage the partnership (art. 2215 CCQ)
Partners can appoint a third party to manage the affairs of the partnership (art. 2213 CCQ)
The details of management should be specified in the partnership agreement
Discuss the transfer of ownership in partnerships.
The transfer of ownership is possible
The partners agree on how to deal with each partner’s share of the assets
- Right of first refusal: if you want to sell your share, you must propose it to your partner to buy it first. If they refuse, then you may take an offer from a third party
Discuss the termination of a partnership.
- Agreement of the partners
- Death
- Bankruptcy
- Must file a declaration of cancellation (no cost - regular; $28 - priority)
*Note: same goodwill issues as with sole proprietorship
Enumerate the advantages and disadvantages of the partnership.
Advantages:
- Simple start-up
- Low start-up costs
- Easy to dissolve
- Easier financing
Disadvantages:
- Unlimited liability
- Lack of continuity
- Conflict
- Transfer difficulties
What are the two types of partners in a limited partnership?
2 types of partners: General & Special
General:
- have solidary and unlimited liability
Special:
- only liable up to the agreed amount of their contribution to the partnership (art. 2246)
- not permitted to take part in the management of the partnership, but may give advisory opinions (art. 2244 CCQ)
What is a partnership agreement?
- Overview of partnership agreement template in the optional course text, Essentials of Quebec Business Law, 4th Ed. (see myCourses)
Google: a document used to dictate the terms of a business partnership between two or more partners. It encompasses information about capital contributions, management, and profit and loss distribution.
