Sole Proprietorship, Co-operative, Partnership

Question 1

Concept of Legal Liability

Answer 1

legal liability is a right recognized and enforced by law and result in court order remedy

Question 2

Liability

Answer 2

Debt or obligation. Right recognized law that can be enforced by a person, court process and result in court order remedy

Question 3

Vicarious Liabilities

Answer 3

liabilities (torts) committed by employees in the course of their employment is liability of employer

Question 4

Limited Liability

Answer 4

How business owners can protect their personal assets from business liabilities. Separate entity

Question 5

Common Law Liabilities created by courts (3)

Answer 5

Tort - people harm someone
Property + Ownership
Restitution - stolen/lost/damage

Question 6

Statutory Liabilities (3)

Answer 6

Taxes, Partnership Act, Criminal Act

Question 7

Liabilities and Legal Risk Management

Answer 7

considering potential liabilities that the business may encounter

Question 8

5 Steps of Legal Risk Management

Answer 8

1. Legal Audit of operation: examine every action in which the business is involved
2. Prioritize potential risk and liabilities: likelihood of them occurring and consequence
3. Strategies: prevention and reaction
4. Implementation and Revision
5. On going revision

Question 9

Common Law process of there being a tort liability (3)

Answer 9

Intentional Act, Causation, Proscribed Harm

Question 10

Civil Law and liability probabilities

Answer 10

Balance of probabilities, 50% + 1% so lower standards for lower consequences

Question 11

What was capital crime and why did it have high standards

Answer 11

founds guilty then killed by state, higher standards of proof beyond reasonable doubt

Question 12

4 Types of Risk Management

Answer 12

Avoid, Reduce, Transfer or Absorb the risk

Question 13

Sole Proprietorships:
Type of legal entity?
Type of liability?
Who owns it?

Answer 13

legal entity not separate from owners
unlimited liability
owned by single individual

Question 14

Sole Proprietorships:
How is income added and for what purpose?
Difficulty to set up and dissolve?

Answer 14

Income of sole proprietor for tax purposes
Easiest and simplest form of entity

Question 15

Sole Proprietorships how does it exist with operations and some provisions of external factors

Answer 15

Whenever an individual carries on business for his or her own account without either medium of an incorporated company or participation of other individuals, except employees

Question 16

how does unlimited liability work for sole proprietorship?

Answer 16

All business and personal assets of the sole proprietor can be seized in fulfillment of the sole proprietorship business obligations and liabilities

Question 17

How does naming a business in sole proprietorship work?

Answer 17

Carry business in own name = don’t have to register, otherwise can’t name that would be confused with one that already exists and must register

Question 18

3 other Advantages of Sole Proprietor (not basic definition)
*2 with name registration

Answer 18

1. Deal w/ assets without interference
2. Company office in offices in MB where name registrations occurred
3. Business name registrations act: requires sole proprietorship to register name within 90 days of reservation

Question 19

(Prophylactic Actions) How to protect yourself from unlimited liability (4)

Answer 19

Insurance, Investments in Creditor Proof, Redistribute property, transfer to estate

Question 20

Prophylactic Action - Insurance

Answer 20

Property, Third party insurance, higher the business risk = higher insurance cost

Question 21

Prophylactic Action - Investments in creditor proof assets

Answer 21

Ones creditors cannot attack etc pension plan, RSP’s, Insurance, transfer to spouse

Question 22

Prophylactic Action - redistribute estate and transfer assets to individuals

2 provisions

Answer 22

Must be absolute transfer done well in advance of going into business

If you go bankrupt, trustee can review transaction of up to 5 years

Question 23

Why shouldn’t you transfer assets or property to spouse or Why would property exempt from division in marriage act be dangerous to transfer?

Answer 23

In case of separation, spouse can take all of it or u may only receive back 50% of property or some share. Rather than you originally having all of it

Question 24

What assets/property are not divisible in marriage? (2)

Answer 24

Property acquired prior to marriage (only incremental amount), or property acquired through inheritance

Question 25

What is a con to transferring assets/property to parents

Answer 25

If you transfer to parents and they pass away and their will is wrong then other beneficiaries can get your property

Question 26

What is a prenuptial agreement

Answer 26

Determines the allocation of and supports payment in event of divorce (signed before marriage)

Question 27

When do you want a prenuptial agreement?
When are you opposed?

Answer 27

You have more money than other spouse.
You have less money than the other spouse

Question 28

Family Property Act

Answer 28

Extends to cohabitants of 3 years with conjugal relations

Question 29

Types of Trusts - Testamentary

Answer 29

execution upon death by trustees

Question 30

Types of Trusts - Intervivos

Answer 30

Better for sole proprietors in terms of asset protection, not as good of tax benefit, but better for protection

Question 31

Cooperatives Examples
where are they prominent
what type of idea are they?

Answer 31

• Co-op, credit unions, Mountain Equipment co-op, Red River co-op
• Prominent in west Canada and prairies
• political idea

Question 32

Cooperatives description

Answer 32

provide members with g/s at a cost lower than cost of similar g/s in marketplace. Sell goods in a way to maximize returns of members. Eliminating middle men in economy

Question 33

1. Cooperatives try to sell their product _____ to _____ as possible
2. why do consumer attempt to buy from producers as possible?

Answer 33

1. directly, consumer
2. Goods can be delivered cheaper

Question 34

Why were cooperatives created in western Canada?

Answer 34

Forced to pay high prices of g/s from the only producer in Ontario. Buying else meant lots of tariffs

Question 35

Cooperatives basic principles (4)

Answer 35

1. Each member has one vote, regardless of number of shares held or capital contributed
2. No proxy votes, need to be there at meeting to vote
3. No fixed rate return on capital
4. profits not required to operate co-operative are paid to members in accordance w/ quantity of goods purchased or sold through organization by the member

Question 36

Partnerships (Firm)

Answer 36

Is the relation which subsists between persons carrying on a business with the view of profit

Question 37

Partnership Act
what is second source of partnership act
can judges make law?

Answer 37

All law pertaining to partnerships.
Second source is case law
Judges can make law if not in partnership act

Question 38

1.Partnership Agreement
2. what if no agreement exists?

Answer 38

contract between all of the partners in partnership. Establishes rights and duties, if no agreement exists, partners share profits and liabilities

Question 39

Express Agreement

Answer 39

No agreement but express to each other that they want to go into business

Question 40

Implied Agreement

Answer 40

Judge who implies that parties want to be in business together.

Claim by another party can be made that the relationship was done with a partnership

Question 41

Revenue Sharing is not profit sharing and it is important because of the

Answer 41

consequences of finding the partnership does exist as there are various features

Question 42

Partnership and need for business.
What it includes
What is doesn’t include

Answer 42

Include: Every trade, occupation or profession
Doesn’t include every activity carried on for profit

Question 43

What have courts highlighted about Sharing of profits and partnership

Answer 43

sharing of the profits of a business is highly indicative of existence of a partnership especially if there is no alternative method of payment

Question 44

Additional evidence which is in conjunction with the sharing of profits includes (3)

Answer 44

Contribution of capital
Active role in business
Existence of the ongoing business as opposed to an isolated transaction

Question 45

Becoming partnership by Estoppels (precluded from denying it)

Answer 45

where you hold yourself out to be a partner even through you’re not or if you allow someone to say they are your partner and you don’t protest it

Question 46

Consequence of becoming a partner is

Answer 46

the partner’s unlimited liability to outsiders who have dealt with the partnership

Question 47

Partner rules in organization:
- Suing
- Employee
- Assets

Answer 47

1. Can’t sue partnership but can sue other partner
2. cannot be employees
3. Separate assets of each partner are at risk to corporations liabilities

Question 48

All Partners are agents of the partnership so how does this work with liabilities(2)

Answer 48

1. Each individual partner can go and create liabilities of partnership
2. create liabilities that you all are responsible for

Question 49

Retiring partners and liability
New partners and liability

Answer 49

• still liable for obligations incurred during their time as a partner
• not liable for obligations existing prior to their joining

Question 50

How to terminate properly from a partnership (2)

Answer 50

1. publish a notice that partnership is dissolve
2. Provide actual notice to people who have dealt frequently and recently with firm