FORMS OF BUSINESS FORMS OF BUSINESS ORGANIZATIONORGANIZATION
FORMS OF BUSINESS FORMS OF BUSINESS ORGANIZATIONORGANIZATION
LEGAL STRUCTURES
SOLE PROPRIETORSHIP One Owner
ADVANTAGES• Low start up costs• Receive all profits – Reinvested in Business• Freedom of Operation• Easily Dissolved• Few Regulations – Cottage Industry
Personal Taxation not Corp.
SOLE PROPRIETORSHIP
DISADVANTAGES
Unlimited Liability – Liable for all debts
Capital Problems
Resources Problems
Must Register if you use a name other than yours - renew every 5 years
PARTNERSHIP“TWO OR MORE”
ADVANTAGESADVANTAGES
• Diversification of skills
• More Available Capital
• More Available Resources
• Low Start up Costs
GENERAL PARTNERSHIP
• 2 or more people who share the operation.
• Profits and Losses, Liabilities shared
LIMITED/SILENT/SECRET
• Only Liable for the amount that they have invested
• Must be 1 or more General Partners with Unlimited Liability
• Silent – no say in operation
• Secret – name is not openly known – only
by the partners. Has a say in the
business operations
PARTNERSHIP AGREEMENT• Name and Location of Business
• Purpose of the Business
• Names of the Partners
• Responsibilities of each partner
• Capital Contributions of each
• Division of Profits and Loss
• Termination, Death, ETC - Provisions
• Dissolution of Partnership means
PARTNERSHIP AGREEMENT
Should be created before going into Should be created before going into operation as there is less chance of operation as there is less chance of argument at this pointargument at this point
Must be written and not verbal to be Must be written and not verbal to be valid and not later disputed.valid and not later disputed.
Must be signed by all partiesMust be signed by all parties
CORPORATIONS
Legal entities existing apart from their owners
Public shares – shares traded on the open
market
Private shares – shares held by a limited
number of people
not publically traded
ADVANTAGES
Limited liability (amount of your shares)
Continuous existence (death has no impact)
Transfer ownership (sell shares-do no close)
Change taxation if profits become to high
TERMS
FRANCHISE – venture which for a fee
licences the right to sell its goods
FRANCHISOR – business owner who licences for a fee the right to sell their product of service
FRANCHISEE – person who buys the licence which permits them to use the name, product and expertise or the franchisor
FRANCHISE AGREEMENT
Used to prevent the franchisee from introducing their own ideas or innovations into a proven format
The franchisor must include this in the offering package
TYPES OF FRANCHISESTRADITIONAL – means of distribution of
product
bottling, automotive, some petroleum
BUSINESS FORMAT – franchisor provides all the assistance
Full business format
ADVANTAGES
Buy an established name
Avoid start up costs
Best market location and protected area
Training, advertising help etc. provided
Often turnkey operations
Where the franchisor takes care of all your work except for opening the door each day
DISADVANTAGES
Under financed
Dishonest
Inexperienced
Must report regularily to franchisor
Must follow the franchise system – thus often slow to respond to local market trends
Pay royalty fees
Must contribute to any franchisor plans
ie. Advertising – even if you do not agree
Often a great deal of work for little profit
Not able to introduce your own innovations
Closing note if interest
There are 100’s of franchises available every day with different asking packages.
Do not rush, investigate until you find one that actually fits your life and desires. It is out there if you look
Member owned venture
Responsible only to members NOT outside owners or government
Each member has a voting rights separate from their investment (1 vote only)
Difference from a corporation
Get only 1 vote regardless of your investment
Dividends, if any, are distributed based on a persons use of the co-op services.
4 TYPES IN CANADA
Consumer/supply – purchase goods for members
Service – provide services such as housing
Financial – provide financial services
Workers – produce commodities – wheat, dairy,auto etc.
ADVANTAGES
Less expensive to operate
Members have a feel of ownership
Goods and services at a reduced rate