Stage 6 - legal consideration

Question 1

Individual or Sole Proprietorship advantages and disadvantages.

Answer 1

Advantages include:

1) Simple and inexpensive to start
2) Individual control over operations
3) All profits to the owner
4) Tax simplicity

Disadvantages include:

1) Unlimited liability
2) Higher tax rate
3) More difficult to obtain equity financing
4) Limited resources and opportunity

Question 2

General Partnership advantages and disadvantages.

Answer 2

Advantages include: 
Pooling of financial resources and talents
Simplicity and ease of organization
Increased ability to obtain capital
Potential for growth

Disadvantages include:
Unlimited liability
Divided authority

Question 3

Limited Partnership advantages and disadvantages.

Answer 3

Advantages include:
Limited liability

Disadvantages include:
Centralized management
Difficulty in changing ownership

Question 4

Corporation advantages and disadvantages.

Answer 4

Advantages include:
Limited liability
Continuity of the business even if the owner dies
Easier to raise capital
Employee benefits
Tax advantages

Disadvantages include:
Cost
Legal formalities
Inability to flow losses through

Question 5

Employment Standards

Answer 5

1. Hours of work
2. Minimum wages
3. Statutory holidays
4. Overtime pay
5. Equal pay for equal work
6. Termination of employment
7. Severance pay
8. Working conditions
9. Health and safety concerns

Question 6

What are the three approaches to managing risk?

Answer 6

1) Reduce it - Taking defensive actions
2) Retain it - Accepting it as a possible cost of doing business and budgeting for it accordingly
3) Transfer it - shift the risk to another party