Chapter 13: Ownership & Management Flashcards
Sole Proprietorship
businesses owned by one individual
all the assets & liabilities of the business belong to the individual not the business
business income reported on the individuals tax returns
business owner’s personal property is at risk from lawsuits
Partnership
2+ individuals w/ a view to profit
created expressly or by the conduct of the partners
income/profits/losses are shared equally.
personal property of each partner is at risk from lawsuits
partnership income is reported on individual’s tax returns
limited liability partnerships are allowed
partners owe eachother a duty of good faith
Duty of Good Faith
partners must act only in the best interests of the partnership
Limited Partnership
allows limited partners to limit their liability amount to their financial contributions provided certain conditions are met
Limited Partnership Act
Ontario law that states one partner must have unlimited liability and that limited partners declare the the amount of their respective contributions
Corporations
created by a statute w a separate existence from their owners
Shareholders
owners of a company
liability limited to their investment
Board of Directors
elected by the shareholders and which must direct the broad policy affairs of the corporation in the best interests
Franchises
franchisee pays royalties to franchiser for its reputation and quality and for market development
Chains
one business owner operates at several locations
Non Competition Clauses
clause in the purchase agreement to restrict the seller from competing with the business for a reasonable amount of time w/in a reasonable geographical location
can apply to employees using trade secrets, confidential information and trade connections
Share Purchase
the purchaser assumes all assets and liabilities of the business (better for the seller)
Asset Purchase
the buyer can pick and choose the assets he wants to purchase and assume the liabilities of those assets only (better for the buyer)
BDBC
business development bank of canada
Three Methods to Finance a Business
equity financing
debt financing
sale of assets
Real Property
includes land, buildings and fixtures (items affixed to the building)
Personal Property
includes chattles (tangible items) and intangibles (intellectual property, financial papers and rights such as those under contract)
Property (2)
Real Property
Personal Property
Ownership of Land
business may own a freehold interest in land and fixtures
requires payment of property taxes and maintenance of the property
market value fluctuates
Freehold
is the highest form of ownership but hold the highest form of responsibility
Adverse Possession 4
at least 10 years (20 for easements)
open & notorious
unchallenged
exclusive
continuous
Easements
is a right enjoyed by one landowner over th land of another landowner for a specific purpose
Restrictive Covenants
a restriction placed on some aspect of the land
Zoning
is a restrictive covenant places on land by a municipality
Mortgages
real property can be given as security for a money loan
Mortgagor
person borrowing the money
Mortgagee
person lending the money
Amortization
is the time required to pay off the principle completely at a particular interest rate
terms have set rates then negotiated
Default on Mortgage 5
foreclosure power of sale action on the covenant taking possession seizing and selling by public auction (distraining)
Land Liens
supplier or worker who is not paid by an owner can register a lien against the title to property
Real Property Leases
allows the lessee to use the lessor’s property for the duration of the lease in exchange for rent
Chattels
are physical personal or business property not affixed to land or buildings
Intangibles
are not land or chattels
shares in a company, debt instruments, goodwill in a business, trademark ownership
Equipment Leases
also included in personal property
Conditional Sales Contracts
rent to own with a lump sum payment
the business acquires ownership at the end of the lease period after the payment of a lump sum
chattel liens
an unpaid repairer or storer of equipment may be entitled to put a lien on it
Trademarks
are intangible intellectual property
a symbol, word, name or device used to identify a company or its product
Passing Off prevention the owner must show (5)
- misrepresentation (even if innocent)
- made by the defendant trader in the course of trade
- to prospective customers
- which reasonably foreseeably could have the effect of injuring goodwill, and
- which did or probably injury the goodwill of the trademark owner’s business
Marketing
direct marketing includes signs, business cards, brochures and advertising
indirect marketing includes: word of mouth, good service and attractive amenities
Federal Competition Act
prevents misleading advertising and provides stiff penalties for transgressions especially for factual misrepresentations
