Business Fundamentals Types of Business Ownership Types of
Business Fundamentals Types of Business Ownership
Types of Business Ownership � Who is your boss? � Who is your boss’s boss? � Can you become part owner? Forms of business ownership and type of business help describe how the business is organized and run.
4 Types of Ownership 1. Sole Proprietorship 2. Partnership 3. Corporation 4. Co-operative
1. Sole Proprietorship �Owned by one person, who performs most roles and owns everything. �Owner gets all profits, takes all the losses → called unlimited liability. �Easiest and least expensive to set up. �Easiest for tax purposes → income recorded under personal income.
1. Sole Proprietorship Advantages �Owner makes all the decisions- hours of business, whom to hire. �They are their own boss. �Any profits belong to the owner.
1. Sole Proprietorship Disadvantages � The owner may lack the ability to buy the right supplies, do accounting etc. � It the business loses money, so does the owner. � Creditors can claim the personal belongings of the owner. � Long hours. � If the owner is ill the business doesn't’t open.
2. Partnerships �Two or more individuals share costs and responsibilities. �Terms of partnership recorded in partnership agreement. � “Silent” partners- partners that usually will front a lot of capital, but do not want to participate in business decisions – receive profits in return.
2. Partnerships �Two types of Partnerships can exist in a business: � General partnership �All partners have unlimited liability (can be held responsible for the other partner’s business related debts. ) � Limited partnership �Partners have limited liability (only responsible for their share. )
2. Partnership Advantages � Two or more people share decision making process. � One person may be better at one task than the other partner. � Sometimes easier to borrow money if two people are involved.
2. Partnership disadvantages � Share profits. � Partners could disagree. � Friendships can be lost over time as a result.
3. Corporation � Business with a legal status. � Can be as small as one person, or multinational. � Some owned by individuals, families, small groups.
3. Corporation � Ownership often broken into small units, shares, which are sold through a stock exchange. (ie. TSX) → a publicly traded corporation � Those who buy: shareholders.
3. Corporations � Since there are many owners, a board of directors runs corp. � Shareholders have limited liability, not responsible for debts. � Get profits as dividends.
3. Corporation TYPES 1. Private Corporation � Only a few people control stock. � Not publicly traded. 2. Public Corporation � Sell shares to raise money. � 1 share = 1 vote; � Those with most shares influence company decisions (usually orig. owner, execs. ) 3. Crown Corporation � � � Business owned by the federal or provincial government. Federal: VIA Rail, Canada Post, Bank of Canada. Provincial: BC Transit, BC Lottery, BC Hydro, BC Museum.
4. Cooperatives � Business owned by workers/those who use it. � Run by board of directors. � Each member only gets 1 vote. � Profits shared based on use. �Examples: �Peninsula Co-op, Mountain Equipment Coop (MEC. )
Franchise �A franchisor licenses the rights to the business to a franchisee for a fee. �Franchisee runs business according to agreement. �Franchisee also pays monthly fee, has to purchase product through franchiser, sometimes gets trained by franchiser, has to maintain uniform quality etc. �Examples: Tim Hortons, Mc. Donalds, M&M Meats, Boston Pizza, UPS Store.
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