Chapter 7 (2) Flashcards
What is business structure?
The form of carrying on business that dictates key aspects of a business’s creation. For example, it’s creation, how it conducts internal affairs, it’s relationship to other businesses, how it pays taxes, and the extent to which it is legally liable.
Why are business structure, aka business forms, important?
They clarify your legal relationship with colleagues and Co workers, they can strike the right balance between the need for simplicity and the need to limit liability, they can help plan for the future, and they will affect the amount of professional assistance you need
What is solo proprietorship?
Carrying on business whereby one person owns, and operates the business with no legal separation from the owner and business
What is unlimited liability?
Being forced to take full responsibility for any debt incurred or loss caused by a business (this is the main disadvantage of sole proprietorship)
What is a partnership, aka a firm?
The form of carrying out business where two or more people operate a business, with no legal separation between the owners and the business
What is a partnership agreement?
A contract singed by all partners that sets out how the partnership will operate and how it will end
What are the three types of partnerships in canada ?
The general partnership, limited partnership, and the limited liability partnership
What is a general partnership?
The partnership that is not registered with the government as a limited or limited liability government
What is joint liability?
A creditor may sue or collect from all partners for a partnership debt. The partners will contribute equally or as set up in their agreement
What is several liability
A creditor may sue or collect from one or some of the partners for a debt if the other partners are unable to pay. Partners who have paid this debt can then look for reimbursement from the non paying partner
What is a limited partnership?
A partnership composed of a minimum of one general partner and one limited partner who provides money or property to the firm and shares in the profits but who does not participate in the business affairs of the firm and whose liability is limited to exclude any personal assets
How do you create a limited partnership?
Unlike sole proprietorship or a general partnership, a limited partnership is formed when a partnership declaration is filed under a provincal limited partnership statue. This declaration must include basic information such as names and contact info of all partners
What is an limited liability partnership?
Typically only given as a option to professionals such as lawyer, expect in the northwest territories and BC, the LLP is composed of partners who are personally liable for their own negligence and negligence of those they supervise; but, they are not liable for the other partners negligence
How can one create a limited liability partnership?
When two or more people enter into a written partnership agreement that designates the partnership as a LLP. The LLP must also enter their name under the business names act before it can conduct business
What does a partnership agreement typically consist of?
It is a comprehensive agreement including financial matters such as bank accounts, compensation matters such as division of profits, business matters such as managing employees, membership, and dissolution of the partnership