BUSINESS OWNERSHIP STRUCTURES (PG. 538-589)

Question 1

SOLE PROPREITORSHIP

Answer 1

An unincorporated business owned by one individual

Question 2

UNLIMITED LIABILITY

Answer 2

Proprietor is personally liable for all of the sole proprietorship’s obligations and liabilities

Question 3

GENERAL PARTNERSHIP

Answer 3

A relationship between two or more parties carrying on an unincoporated business with a view to profit

Question 4

CAPITAL COST ALLOWANCE (CCA)

Answer 4

A discretionary deduction available to businesses with depreciable property

Question 5

CAPITAL ACCOUNT

Answer 5

Represents the equity in the partnership

Question 6

BUY-SELL ARRANGEMENT

Answer 6

Allows the other partners to buy out the affected partner’s interest in the partnership at an agreed upon price

Question 7

LIMITED PARTNERSHIP

Answer 7

Includes at least one general partner (responsible for managing the business soperation and is liable for debts and obligations of the partnership) and one limited partner (contributes capital but is not involved in the ongoing business operations)

Question 8

AT-RISK RULES

Answer 8

The amount of allocated partnership losses that a limited partner can deduct is limited to the amount at risk, less certain deductions

Question 9

LIMITED LIABILITY PARTNERSHIP

Answer 9

Similar to a general partnership, except that the personal liability of partners does not extend to the negligent actions of other partners

Question 10

CORPORATIONS

Answer 10

A business structure created according to a prescribed set of rules and recognized in the eyes of the law as a legal entity with rights and legal obligations

Question 11

SHAREHOLDERS

Answer 11

Owners of a corporation

Question 12

OWNER/MANAGER

Answer 12

A shareholder who is actively involved in the management of the corporation

Question 13

PERPETUAL EXISTENCE

Answer 13

Corporation exists independent of its shareholders and continues in perpetual existence unless it is wound up or dissolved

Question 14

PRIVATE CORPORATION

Answer 14

A corporation that is not a public corporation and is not controlled directly or indirectly by one or more public corporations or Crown corporations

Question 15

CANADIAN-CONTROLLED PRIVATE CORPORATION (CCPC)

Answer 15

A private corporation either incorporated in Canada or resident of Canada since June 18, 1971 (See pg. 567)

Question 16

PUBLIC CORPORATION

Answer 16

A corproation that is either a resident in Canada with a class of shares listed on a prescribed stock exchange in Canada, or has elected in a prescribed manner to be a public corporation

Question 17

AUTHORIZED SHARE CAPITAL

Answer 17

The maximum number or value of shares that a corporation may issue, stated in the Articles of Incorporation or charter

Question 18

ISSUED CAPITAL

Answer 18

Authorized share capital that the corporation has issued

Question 19

PAID-UP CAPITAL

Answer 19

Shares that have been issued and fully paid

Question 20

SHARE

Answer 20

Shareholer’s proportionate interest in the capital of a corporation

Question 21

COMMON SHARES

Answer 21

The most basic type of shres representing ownership in the corporation

Question 22

PREFERRED SHARES

Answer 22

Have a fixed redemption amount that does not fluctuate with underlying changes in corporate value

Question 23

EFFECTIVE TAX RATE

Answer 23

Applicable to the general business income of a corporation that does not qualify for the small business deduction

Question 24

FISCAL YEAR

Answer 24

Taxation year for a corporation

Question 25

SMALL BUSINESS DEDUCTION

Answer 25

Enables the corporation to pay less tax, leaving more profits to reinvest in the business

Question 26

ACTIVE BUSINESS INCOME

Answer 26

Business the corporation carries on, other than specified investment business or personal services business, and included an adventure or concern in the nature of trade

Question 27

SPECIFIED INVESTMENT BUSINESS

Answer 27

A business where the principal purpose is to derive income from property (interest, dividends, rents, royalties), unless the corporation employs more than 5 full-time employees

Question 28

PERSONAL SERVICES BUSINESS

Answer 28

A person incorporates in order to provide services that would otherwise be considered employment services

Question 29

DE FACTO CONTROL

Answer 29

Relates to associated corporations where a person has any direct or indirect influence

Question 30

PART IV TAX

Answer 30

A refundable tax that discourages shareholders of private corporations from unduly postponing tax (38.33%)

Question 31

REFUNDABLE DIVIDEND TAX ON HAND (RDTOH)

Answer 31

Part IV tax is refunded when the corporation flows dividends through to its own shareholders ($ 1.00 for every $ 2.61 of dividends paid)

Question 32

ELIGIBLE DIVIDEND

Answer 32

A dividend paid out of corporate earnings taxed at the general corporate tax rate

Question 33

NON-ELIGIBLE DIVIDENDS

Answer 33

Dividends paid out of corporate earnings that were subject to the small business deduction

Question 34

CAPITAL DIVIDEND ACCOUNT (CDA)

Answer 34

Capital dividends are typically not taxable to the shareholder when paid and include the tax free portion of cpaital gains realized by the corporation, capital dividends received from a subsidary corporation and life insurance proceeds (lass ACB of insurance policy)

Question 35

OPERATING COMPANY

Answer 35

A corporation that is carrying on active business

Question 36

HOLDING COMPANY

Answer 36

A corporation established primarily for the purpose of holding assets or investments

Question 37

PRO RATA

Answer 37

Proportionally