Business Organizations

Question 1

What are the three types of businesses in Canada?

Answer 1

• Sole Proprietorship
• Partnership
• Corporation
• (fourth type can be a joint venture)

Question 2

What is a sole proprietorship?

Answer 2

• Individual carrying on a business (under their name or a business name)
• Takes all the profit or loss of the business
• all of the individuals assets are at risk for the liabilities of the business.
• They can have a business name, but this doesn’t change the status of the business.

Question 3

What are some advantages and disadvantages to a sole proprietorship?

Answer 3

Disadvantages: -Liability- the individual is completely and fully liable for the debts and obligations of the business.
-Tax rate- The tax rate is usually higher than the corporate tax
Advantages: Simple to set up, low set-up cost, no corporate reporting or filing requirements, at a low income levels there may be a tax advantage

Question 4

What is a partnership?

Answer 4

A group of individuals or corporations who pool their resources to run a business. The partners share the profits and are jointly responsible for all debts and obligations of the business. It is recommended the you establish a partnership agreement early on to establish who has authority, etc.

Question 5

What are some advantages and disadvantages to a partnership?

Answer 5

Advantages:
-No incorporation costs or on-going filing fees
-Sharing of expenses, risk,  expertise. 
Disadvantages: 
-Liability 
-Sharing of Risk 
Taxes can be complicated

Question 6

What is the fiduciary duty of a partnership?

Answer 6

each partner owes each other a fiduciary and act in the best interest of the partnership and declare conflicts of interest

Question 7

What is a limited partnership?

Answer 7

a-have at least one general partner and one limited partner. The general has unlimited liability and runs the business. The limited partner is liable only for his cash contribution and cannot actively participate in the business. .

Question 8

What is a Limited Liability Partnership

Answer 8

A partnership wehre the liability of a partner is limited only to the liability of that partner.

Question 9

When does a partnership end?

Answer 9

Death, Bankruptcy or insolvency

Question 10

What is a corporation?

Answer 10

A legal entity that allows a large number of investors in a common business venture. The liability is now on the corporation and not a single person(s). Must be a Copy. Inc or Ltd.

Question 11

True or False: A corporation is considered a legal person?

Answer 11

True

Question 12

Who owns a corporation?

Answer 12

Its shareholders

Question 13

What are Private Corporations or “closely held” ?

Answer 13

A corporation that is owned by a small number of shareholders and restricts the use of shares. ie. the share s are not offered to the public. Benefit, the records do NOT have to be made public. The names and addresses of the directors must be.

Question 14

What is a Public Corporation

Answer 14

a corporation where shares are publicly traded. There are strict rules and governing bodies for filing and accounting. and is established by an IPO (initial public offering)

Question 15

What is a Joint Venture?

Answer 15

a Partnership formed for a SPECIFIC PROJECT. This could be individuals. partnerships or corporations. Shared resources. risk, profit, expertise.