Types of Businesses & Types of Financial Institutions Flashcards
Chapter 3: page 32
LIABILITY
Goods
Tangible items produced in the economy.
Services
Intangible activities provided by others.
Corporate Social Responsibility
Responsibility of a business to society & environment beyond basic laws.
Sole Proprietorship
Owned and operated by one person w/unlimited liability.
EXAMPLE: barber starting his own barbershop.
Adv & Disadv of Sole Proprietorship
Pros: control over all decisions, owners keeps all profit, income taxed only once.
Cons: responsibility for all liability, less access to funding.
Unlimited Liability
Owner(s) entirely responsible for company debts, which can go beyond their ability to pay.
Limited Liability
Limited in accountability for business debts.
Partnership
Two or more people own & run business.
Three types:
- General
- Limited
- Limited liability
EXAMPLE: group of lawyers starting a firm.
Adv & Disadv of Partnership
Pros: more people to depend on, risk and rewards shared, easier access to capital, different skillsets.
Cons: less choice in decisions, relies on other people.
General Partnership
All partners share unlimited liability for business.
Limited Partnership
One or more partners has unlimited liability and the others have limited.
Limited Liability Partnership
Has limited liability for all partners. Use resources w/o being responsible for another partners’ professional negligence.
(Lawyers, accountants, medical professionals)
Profit Sharing Worked Example: Page 35 - 37
Corporation
Legal entity separate from owners (who own shares).
- registered at provincial/federal level.
Incorporation: process of turning a company into a corporation
Board of Directors
Shareholders
Own shares of corporation, partial owners of business.
Stock(s)
Partial ownership of company.
“Investor buys shares of stock in a company.”
- Stock represents company, sold in units called shares.
