CH6 - Forms of Business Ownership

Question 1

How many paid employees do small businesses have?

Answer 1

Between 1 to 99 paid employees

Question 2

How many paid employees do medium-sized businesses have?

Answer 2

Between 100 to 499 paid employees

Question 3

How many paid employees do large businesses have?

Answer 3

500 and more.

Question 4

What are the 3 types of business organizations?

Answer 4

1. Sole Proprietorship
2. Partnership
3. Corporation

Question 5

What are the 2 types of business organizations in relation to the Canadian laws?

Answer 5

Canadian law has separate business organizations which are incorporated under the Federal and Provincial Law.

Question 6

What are the characteristics of a federal business org?

Answer 6

It is possible to incorporate the following business organizations under the federal law
1. A for-profit corporation
2. A not-for profit corporation
3. A co-operative
Under the federal law businesses can operate across Canada under a single name.

Question 7

What are the characteristics of a provincial business org?

Answer 7

BC law also permits the formation of the following businesses.
1. Sole proprietorship
2. A General Partnership
3. A limited Partnership
4. A Limited Liability Partnership
5. A corporation
6. A BC Incorporated Society
7. A Co-operative

Question 8

What are the advantages of a sole proprietorship org?

Answer 8

1. Inexpensive
2. One owner
3. Can get loans to fund business
4. Can have employees

Question 9

What are the disadvantages of a sole proprietorship org?

Answer 9

1. Unlimited Liability
2. One single source of capital

Question 10

What are the advantages of general partnership?

Answer 10

1. Inexpensive.
2. 2 or more source of capital
3. Can have employees
4. Can get loans to fund the business

Question 11

What are the disadvantages of the General Partnership?

Answer 11

Unlimited liability to all owners - personal assets at risk.
2. Liable for acts of employees and other partners
3. Increased running costs versus SP.

Question 12

What are the advantages of Limited Partnership?

Answer 12

1. Multiple owners managers more source of capital.
2. Can get loans to fund the business
3. Can have employees
4. Limited partners have limited liability

Question 13

What are the disadvantages of Limited Partnership

Answer 13

1. Unlimited liability for the general partners - personal assets at risk.
2. More expensive than general partnership due to Government registration requirements.
3. General partners liable for act of employees and other general partners.

Question 14

What are the advantages of LLP?

Answer 14

1. Multi ownership multiple source of capital and management experience.
2. Can get loans and funds
3. Can have employees
4. Partners have limited liability to the extent of their investment in partnership property except for negligence.
5. Corporation can be one of the partners.

Question 15

What are the disadvantages of the LLP?

Answer 15

1. It is more expensive than other forms of business structures due to government registration requirements.
2. Partners take on similar liability to directors and have unlimited liability for their negligence and for the negligence of those that they supervise.

Question 16

What are some of the underlying characteristics of a corporation?

Answer 16

1. Mid to high cost as it must incorporated with the BC government and you have ongoing governance obligations
2. 1 or more shareholder
3. Shareholders liability limited to the amount invested, provided you do not give a personal guarantee. Director’s may be liable in they do not govern the corporation in accordance with the law.

Question 17

What are the advantages of corporation?

Answer 17

1. Can have multiple owners or managers so multiple sources of capital and management expertise.
2. Management can be split from ownership
3. Can get loans to fun the business.
4. Can have employees
5. Shareholders have limited liabilityW

Question 18

What are the disadvantages of corporation?

Answer 18

1. More expensive than general partnership due to government registration requirements.
2. Directors take on significant statutory obligations.

Question 19

What is a merger?

Answer 19

A merger is when 2 companies are joined together.

Question 20

What is an acquisition?

Answer 20

Acquisition is when the shares or assets of a company is acquired by another company.

Question 21

What is the reason companies M&A?

Answer 21

1. Cost synergies and economies of scale
2. Additional revenues from new products and services or access to new markets and territories.

Question 22

What is a not for profit (Non-Profit) corporation or BC Incorporated Society?

Answer 22

The intension is to not to make profit and all the revenue generated is put towards furthering the goal of the organization like developing green technology or building homes for the homeless.

Question 23

What are Co-operatives?

Answer 23

Co-operatives are business orgs that are owned by and run for the benefit of their members.

Question 24

How can corporations reduce the amount of corporation tax due

Answer 24

1. Application of tax credit (in Canada)
2. Legally applying acceptable costs to revenue.
3. By reducing the amount of profit a corporation makes they can reduce the amount of tax they pay
4. Use their croup structure to lower their effective tax rate by moving profits to low tax jurisdictions.