Lec 30: Business Structures

Question 1

Starting up a business

Answer 1

Research the markets and the statistics, Determine your business structure, Choose a location to set up your business, Write up a business plan, Register your business

Question 2

Sole Proprietorship

Answer 2

Assume full responsibility of the debts and obligations related to your business

Question 3

Sole Proprietorship Pros

Answer 3

 Cheap and easy to register
 Full control of business
 All profits go to you directly

Question 4

Sole Proprietorship Cons

Answer 4

You are personally liable for your business
 If your business has debts, compensation can be taken from
your personal assets
 Income taxed at your personal rate
 You have to raise the capital on your own
 You need to be there to run your business
 Need to be involved in all aspects of your business

Question 5

Partnership

Answer 5

Pros
 Easy to register a partnership business
 Costs and other burdens shared between you and your partner
 Can negotiate balance of management, profits, and assets
allotment
Cons
 Partners are personally liable for business
 If business has debts, compensation can be taken from both
partners’ personal assets
 Have to find a suitable partner
 Partners are responsible for each other’s business decisions
 Conflicts and disagreements between partners can be damaging
to the business

Question 6

Limited Liability Partnership

Answer 6

allow protection from personal liabilities arising from negligence by other partners

Question 7

LLP Pros and Cons

Answer 7

Pros
 Individuals are not personally liable for their partner’s business mistakes

Cons
 Do not take part in the control or managing of business
 Still liable for own business decisions
 Must be registered as a limited liability partnership (LLP)

Question 8

Corporation

Answer 8

legal entity that is separate from the owner or shareholders

Question 9

Corporation pros & cons

Answer 9

Pros
 Personally liability is limited
 Ownership is transferrable
 Greater access to capital
 Potentially lower tax rates

Cons
 More expensive to set up compared to other business structures
 Annual filings and corporate records required
 Proof of residency or citizenship may be required
 More complex personnel structure

Question 10

The key people who make up a corporation

Answer 10

Shareholders, Directors, Officers

Question 11

Federal Incorporation

Answer 11

pros
 Nationwide business name protection and rights
 Global recognition

cons
 More expensive
 More paperwork

Question 12

Provincial incorporation

Answer 12

pros
 Cheaper
 Less paperwork

cons
 Entitled to operate only in that province
 Name protection only covers that province

Question 13

Incorporation Process

Answer 13

Choose a name, Determine location of registered office, Define structure of shares (classes and numbers), Determine number of directors, Outline any restrictions on business activities and other provisions

Question 14

Co-operative

Answer 14

Association of persons or businesses pooling their resources for a common goal

Question 15

Co-operative pros and cons

Answer 15

Pros
 Owned and controlled by members
 Democratic control (each member has one vote)
 Limited liability
 Profit distribution

Cons
 Disagreements between members
 Longer decision-making process
 Extensive record keeping
 Less incentive to invest additional capital
 Need all members to participate

Question 16

Business plans

Answer 16

Necessary tool for start-up and well-established businesses

Question 17

Components of a good business plan

Answer 17

Executive summary, Business strategy, Marketing strategy (four P’s of marketing), Operational plan, Strengths, weaknesses, opportunities and threats analysis, Human resources plan, Social responsibility strategy, Financial Forecasts