Chapter 13: Ownership & Management

Question 1

Sole Proprietorship

Answer 1

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

Question 2

Partnership

Answer 2

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

Question 3

Duty of Good Faith

Answer 3

partners must act only in the best interests of the partnership

Question 4

Limited Partnership

Answer 4

allows limited partners to limit their liability amount to their financial contributions provided certain conditions are met

Question 5

Limited Partnership Act

Answer 5

Ontario law that states one partner must have unlimited liability and that limited partners declare the the amount of their respective contributions

Question 6

Corporations

Answer 6

created by a statute w a separate existence from their owners

Question 7

Shareholders

Answer 7

owners of a company

liability limited to their investment

Question 8

Board of Directors

Answer 8

elected by the shareholders and which must direct the broad policy affairs of the corporation in the best interests

Question 9

Franchises

Answer 9

franchisee pays royalties to franchiser for its reputation and quality and for market development

Question 10

Chains

Answer 10

one business owner operates at several locations

Question 11

Non Competition Clauses

Answer 11

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

Question 12

Share Purchase

Answer 12

the purchaser assumes all assets and liabilities of the business (better for the seller)

Question 13

Asset Purchase

Answer 13

the buyer can pick and choose the assets he wants to purchase and assume the liabilities of those assets only (better for the buyer)

Question 14

BDBC

Answer 14

business development bank of canada

Question 15

Three Methods to Finance a Business

Answer 15

equity financing
debt financing
sale of assets

Question 16

Real Property

Answer 16

includes land, buildings and fixtures (items affixed to the building)

Question 17

Personal Property

Answer 17

includes chattles (tangible items) and intangibles (intellectual property, financial papers and rights such as those under contract)

Question 18

Property (2)

Answer 18

Real Property

Personal Property

Question 19

Ownership of Land

Answer 19

business may own a freehold interest in land and fixtures

requires payment of property taxes and maintenance of the property

market value fluctuates

Question 20

Freehold

Answer 20

is the highest form of ownership but hold the highest form of responsibility

Question 21

Adverse Possession 4

Answer 21

at least 10 years (20 for easements)

open & notorious
unchallenged
exclusive
continuous

Question 22

Easements

Answer 22

is a right enjoyed by one landowner over th land of another landowner for a specific purpose

Question 23

Restrictive Covenants

Answer 23

a restriction placed on some aspect of the land

Question 24

Zoning

Answer 24

is a restrictive covenant places on land by a municipality

Question 25

Mortgages

Answer 25

real property can be given as security for a money loan

Question 26

Mortgagor

Answer 26

person borrowing the money

Question 27

Mortgagee

Answer 27

person lending the money

Question 28

Amortization

Answer 28

is the time required to pay off the principle completely at a particular interest rate

terms have set rates then negotiated

Question 29

Default on Mortgage 5

Answer 29

foreclosure
power of sale
action on the covenant
taking possession
seizing and selling by public auction (distraining)

Question 30

Land Liens

Answer 30

supplier or worker who is not paid by an owner can register a lien against the title to property

Question 31

Real Property Leases

Answer 31

allows the lessee to use the lessor’s property for the duration of the lease in exchange for rent

Question 32

Chattels

Answer 32

are physical personal or business property not affixed to land or buildings

Question 33

Intangibles

Answer 33

are not land or chattels

shares in a company, debt instruments, goodwill in a business, trademark ownership

Question 34

Equipment Leases

Answer 34

also included in personal property

Question 35

Conditional Sales Contracts

Answer 35

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

Question 36

chattel liens

Answer 36

an unpaid repairer or storer of equipment may be entitled to put a lien on it

Question 37

Trademarks

Answer 37

are intangible intellectual property

a symbol, word, name or device used to identify a company or its product

Question 38

Passing Off prevention the owner must show (5)

Answer 38

1. misrepresentation (even if innocent)
2. made by the defendant trader in the course of trade
3. to prospective customers
4. which reasonably foreseeably could have the effect of injuring goodwill, and
5. which did or probably injury the goodwill of the trademark owner’s business

Question 39

Marketing

Answer 39

direct marketing includes signs, business cards, brochures and advertising

indirect marketing includes: word of mouth, good service and attractive amenities

Question 40

Federal Competition Act

Answer 40

prevents misleading advertising and provides stiff penalties for transgressions especially for factual misrepresentations