Week 1

Question 1

Sole Proprietors, properties.

Answer 1

No formal legal organization.
One owner – total management authority.
No separation of management and ownership.

Question 2

Sole Proprietors, disadvantages.

Answer 2

• unlimited personal liability.
• financing – must borrow money directly. Partnership and incorporation allow wider range of investment possibilities. Usually used for small businesses.
• no continuity (because no separate legal personality) - on death terminates.

Question 3

Sole Proprietors, advantages.

Answer 3

• simplest form of business organization.
• ease of creation and dissolution.
• low startup costs.

Question 4

Partnerships - General partnerships, properties

Answer 4

• based on Partnership Act & possible partnership agreement
• Partnershipdefined asa relation which subsists between persons “carrying on business” “in common” with a view of “profit”
• two or more owners

Question 5

Partnership: describe structure

Answer 5

No separation of ownership and management. Partners directly carry on business themselves.
Partnership is not a legal entity separate from the partners

Question 6

What are a partnership’s legal requirements?

Answer 6

Name MAY be registered under thePartnership Act– does not provide same protection as the BCBCA
If partnership business is for trading, mining or manufacturing purposes, must register with Registrar within 3 months of formation of firm
Business licence may be required
Partnership Agreement not required but usually recommended

Question 7

What are the advantages of a partnership?

Answer 7

• easy to set up and easy to dissolve partnership
• general lack of formalities or legal requirements (unlike incorporation)
• flexibility in designing management structure through partnership agreement

Question 8

What are disadvantages of a partnership?

Answer 8

• name does not get the same protection as under incorporation.
• No limited liability. Result:
• No separate legal personality

Question 9

LIMITED Partnership, what is it?

Answer 9

Specialized type of business association lying somewhere between a corporation and a regular (or general) partnership.

Question 10

LIMITED Partnership, what do they consist of?

Answer 10

• onegeneral partnerwith unlimited liability and

- onelimited partnerwith limited liability

Question 11

LIMITED Partnership, legal requirements?

Answer 11

• Formed when a certificate signed by persons desiring to form the limited partnership is filed with the registrar (s. 51(1)Partnership Act) (It is a creature of statute)

Question 12

Limited Liability Partnerships (LLPs), properties

Answer 12

• Used by professions such as lawyers, accountants
• a partner in a LLP remains liable for the partner’s own negligent or wrongful act or omission but only if the partner had knowledge of the acts or omissions and failed to take reasonable steps to prevent them.