BUSINESS OWNERSHIP STRUCTURES (PG. 538-589) Flashcards
SOLE PROPREITORSHIP
An unincorporated business owned by one individual
UNLIMITED LIABILITY
Proprietor is personally liable for all of the sole proprietorship’s obligations and liabilities
GENERAL PARTNERSHIP
A relationship between two or more parties carrying on an unincoporated business with a view to profit
CAPITAL COST ALLOWANCE (CCA)
A discretionary deduction available to businesses with depreciable property
CAPITAL ACCOUNT
Represents the equity in the partnership
BUY-SELL ARRANGEMENT
Allows the other partners to buy out the affected partner’s interest in the partnership at an agreed upon price
LIMITED PARTNERSHIP
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)
AT-RISK RULES
The amount of allocated partnership losses that a limited partner can deduct is limited to the amount at risk, less certain deductions
LIMITED LIABILITY PARTNERSHIP
Similar to a general partnership, except that the personal liability of partners does not extend to the negligent actions of other partners
CORPORATIONS
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
SHAREHOLDERS
Owners of a corporation
OWNER/MANAGER
A shareholder who is actively involved in the management of the corporation
PERPETUAL EXISTENCE
Corporation exists independent of its shareholders and continues in perpetual existence unless it is wound up or dissolved
PRIVATE CORPORATION
A corporation that is not a public corporation and is not controlled directly or indirectly by one or more public corporations or Crown corporations
CANADIAN-CONTROLLED PRIVATE CORPORATION (CCPC)
A private corporation either incorporated in Canada or resident of Canada since June 18, 1971 (See pg. 567)
PUBLIC CORPORATION
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
AUTHORIZED SHARE CAPITAL
The maximum number or value of shares that a corporation may issue, stated in the Articles of Incorporation or charter
ISSUED CAPITAL
Authorized share capital that the corporation has issued
PAID-UP CAPITAL
Shares that have been issued and fully paid
SHARE
Shareholer’s proportionate interest in the capital of a corporation
COMMON SHARES
The most basic type of shres representing ownership in the corporation
PREFERRED SHARES
Have a fixed redemption amount that does not fluctuate with underlying changes in corporate value
EFFECTIVE TAX RATE
Applicable to the general business income of a corporation that does not qualify for the small business deduction
FISCAL YEAR
Taxation year for a corporation
SMALL BUSINESS DEDUCTION
Enables the corporation to pay less tax, leaving more profits to reinvest in the business
ACTIVE BUSINESS INCOME
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
SPECIFIED INVESTMENT BUSINESS
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
PERSONAL SERVICES BUSINESS
A person incorporates in order to provide services that would otherwise be considered employment services
DE FACTO CONTROL
Relates to associated corporations where a person has any direct or indirect influence
PART IV TAX
A refundable tax that discourages shareholders of private corporations from unduly postponing tax (38.33%)
REFUNDABLE DIVIDEND TAX ON HAND (RDTOH)
Part IV tax is refunded when the corporation flows dividends through to its own shareholders ($ 1.00 for every $ 2.61 of dividends paid)
ELIGIBLE DIVIDEND
A dividend paid out of corporate earnings taxed at the general corporate tax rate
NON-ELIGIBLE DIVIDENDS
Dividends paid out of corporate earnings that were subject to the small business deduction
CAPITAL DIVIDEND ACCOUNT (CDA)
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)
OPERATING COMPANY
A corporation that is carrying on active business
HOLDING COMPANY
A corporation established primarily for the purpose of holding assets or investments
PRO RATA
Proportionally
