Week 1 Flashcards
Sole Proprietors, properties.
No formal legal organization.
One owner – total management authority.
No separation of management and ownership.
Sole Proprietors, disadvantages.
- 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.
Sole Proprietors, advantages.
- simplest form of business organization.
- ease of creation and dissolution.
- low startup costs.
Partnerships - General partnerships, properties
- 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
Partnership: describe structure
No separation of ownership and management. Partners directly carry on business themselves.
Partnership is not a legal entity separate from the partners
What are a partnership’s legal requirements?
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
What are the advantages of a partnership?
- 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
What are disadvantages of a partnership?
- name does not get the same protection as under incorporation.
- No limited liability. Result:
- No separate legal personality
LIMITED Partnership, what is it?
Specialized type of business association lying somewhere between a corporation and a regular (or general) partnership.
LIMITED Partnership, what do they consist of?
- onegeneral partnerwith unlimited liability and
- onelimited partnerwith limited liability
LIMITED Partnership, legal requirements?
- 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)
Limited Liability Partnerships (LLPs), properties
- 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.