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Intro to Business > Legal Forms of Ownership > Flashcards

Legal Forms of Ownership Flashcards

1
Q

What are the 4 main types of ownership?

A
  1. Sole proprietorship
  2. Partnership
  3. Corporation
  4. Cooperative
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2
Q

What is a sole proprietorship?

A
  • One owner
  • Legally indistinct from owner
  • Full liability: owner pays all taxes and assumes all risks
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3
Q

What is a partnership?

A
  • Between 2 or more people bounded through a contract
  • Share of revenues and risks
  • Full liability
  • Partners responsible for each other’s mistakes

can be general or limited, where the liability of the limited partners is up to the amount of contribution in the partnership

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4
Q

What is a corporation?

A
  • Distinct legal entity
  • Owned by shareholders
  • Managers and board of directors
  • Limited liability
  • Pays income and other taxes on the corporation’s operations
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5
Q

What is a cooperative?

A
  • Distinct legal entity
  • Owned by members
  • Can be for profit or non-profit
  • Surpluses are distributed to members
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6
Q

What are the advantages and disadvantages of sole propiertorship

A

A

  • limited paperwork/regulations
  • full retention of control and profits
  • easy start-up

D

  • unlimited liability
  • impossible to transfer
  • limited financial resources
  • lack of continuity of business if you are unavailable
  • income is taxable at personal rate
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7
Q

What are the advantages and disadvantages of a partnership?

A

A

  • easy to start
  • equal share in management, profits and assets
  • tax advantage

D

  • no legal difference between you and business
  • unlimited liability
  • difficult to find a partner (conflict)
  • held financially responsible for partners
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8
Q

What are the advantages and disadvantages of corporations

A

A

  • Limited liability for owners
  • Permanence of existence
  • Ease of financing
  • Specialized management

D

  • Complex administration
  • Shareholder conflicts
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9
Q

What are the shareholders’ roles?

A
  • Own corporation through shares
  • Make decisions
  • Elect directors
  • Can receive dividends
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10
Q

What is the role of the board of directors?

A

Appoints and oversees management of the day-to-day activities of a corporation

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11
Q

Name the corporate officers.

A
  • CEO: chief executive officer
  • COO: chief operating officer
  • CFO: chief financial officer
  • Secretary
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12
Q

What are the characteristics of a private business?

A
  • Often family owned
  • No secondary market
  • Info is confidential
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13
Q

What are the characteristics of a public business?

A
  • Widely owned
  • Secondary market (stock market)
  • Public reporting obligations
  • Access to equity funding
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14
Q

What is the main difference in for-profit and non-profit organisations?

A

For-profit measure their success through PROFIT

Non-profit measure their success though QUALITY OF SERVICE

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15
Q

What are Crown corporations?

A

State-owned enterprises owned by the Sovereign of Canada.

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16
Q

While doing a job, an installation error is made and 6 months later, there is a fire in the house where the work was done. The owners of the house sue the company. The company is ordered to pay damages of $200,000.

The business is a sole proprietorship. Who is responsible for paying the debt? If the owner of the business has a house worth $300,000, could this be used to pay the debt? What about personal investments he/she has?

A

Responsible? Sole proprietor

Is the house at risk? Yes

Are other funds at risk? Yes

17
Q

While doing a job, an installation error is made and 6 months later, there is a fire in the house where the work was done. The owners of the house sue the company. The company is ordered to pay damages of $200,000.

The business is a general partnership. One of the partners made the error. Who is responsible for paying the debt and how would it be paid? If the partner that made the error has no money and no assets, could the other partner be held responsible?

A

Responsible? All the partners

Could the other partner be held responsible?
Yes

18
Q

While doing a job, an installation error is made and 6 months later, there is a fire in the house where the work was done. The owners of the house sue the company. The company is ordered to pay damages of $200,000.

The business is a corporation. The corporation owns a truck worth $50,000 and little cash. The owner of the business is a very wealthy man, with personal investments of millions of dollars. Who is responsible for paying the debt and how would it be paid? Would the owner be liable for the debts of the corporation? Would he be obliged to use his personal fortune to pay the debt?

A

Responsible? The corporation is responsible

Could the owner be held responsible?
No (not unless he personally guaranteed debts of Corp.)

Would he have to use his personal funds?
No (not unless he personally guaranteed debts of Corp.)

Intro to Business (13 decks)

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