FORMS OF BUSINESS ORGANIZATION LEGAL STRUCTURES. SOLE PROPRIETORSHIP One Owner ADVANTAGES Low start up costs Receive all profits – Reinvested in Business.

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

PARTNERSHIP

DISADVANTAGES

UNLIMITED LIABILITY

• Divided Authority

• Hard to find Suitable Partners

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

DISADVANTAGES

Expensive to develop

Public scrutiny

Government restrictions

FRANCHISING

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

CO-OPERATIVES

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)

PURPOSE

To provide the lowest prices for the members not profit margin

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

DISADVANTAGES

SAMES AS A PARTNERSHIP OR CORPORATION DEPENDING ON THE LEGAL FORM CHOSEN