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Questions and Answers
What is one advantage of a corporation compared to other business structures?
What is one advantage of a corporation compared to other business structures?
Which of the following best describes a cooperative?
Which of the following best describes a cooperative?
What is a significant disadvantage of forming a corporation?
What is a significant disadvantage of forming a corporation?
How is ownership divided in a corporation?
How is ownership divided in a corporation?
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Which entity is NOT typically associated with limited liability?
Which entity is NOT typically associated with limited liability?
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What defines a sole proprietorship?
What defines a sole proprietorship?
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Which of the following is an advantage of a sole proprietorship?
Which of the following is an advantage of a sole proprietorship?
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What is a disadvantage of partnerships?
What is a disadvantage of partnerships?
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How can partnerships make it easier to obtain bank loans?
How can partnerships make it easier to obtain bank loans?
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Which statement about the longevity of a sole proprietorship is true?
Which statement about the longevity of a sole proprietorship is true?
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What is the primary purpose of a partnership agreement?
What is the primary purpose of a partnership agreement?
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Which of the following statements about the structure of partnerships is correct?
Which of the following statements about the structure of partnerships is correct?
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Which local example represents a sole proprietorship?
Which local example represents a sole proprietorship?
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What factor makes sole proprietorships the most common form of business in Canada?
What factor makes sole proprietorships the most common form of business in Canada?
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What issue could arise from partnerships?
What issue could arise from partnerships?
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Study Notes
Business Ownership Structures
- Various structures exist for business ownership, each with unique characteristics
- Types include sole proprietorship, partnership, corporation, franchise, and cooperative
Sole Proprietorship
- Owned by one person, who is the proprietor
- Proprietor manages all business operations
- Funds for starting the business typically come from personal savings or loans
- Example: Fernandez's Lawn Care Services
- Most common business structure in Canada (over one million)
Sole Proprietorship Advantages
- Simplest business structure to establish
- Owner makes quick decisions and keeps all profits
Sole Proprietorship Disadvantages
- Unlimited liability: owner responsible for business debts
- Personal assets at risk
- Limited life: business ceases if owner leaves or dies
- Higher tax rates than corporations
Partnership
- Owned by two or more individuals
- Partners share costs and responsibilities
- Partnership agreement dictates terms and conditions, including revenue and responsibilities
Partnership Advantages
- Easy to form
- Pooling of economic resources and diverse talents
- Easier to obtain bank loans (due to multiple contributors)
Partnership Disadvantages
- Potential for disputes among partners
- Determining compensation can be complex
- General partners are liable for the company's debts (like in a sole proprietorship)
- Higher tax rates than corporations
Corporation
- Ownership divided into stocks (or shares)
- Can be public or private
- Run by a board of directors
- Example: Manulife Financial
- Offers limited liability (protecting personal assets)
- Can raise capital by selling more stock
Corporation Advantages
- Limited liability (protecting personal assets)
- Easier to raise capital
- Separate legal entity, with continuous life
Corporation Disadvantages
- Costly and complex to start
- Requires legal fees (incorporation)
- Government filings/reports required (public company or not)
Cooperative
- Owned by workers or members
- Members buy products or use cooperative services
- Limited liability (same as a corporation)
- Each member gets one vote in governance (regardless of share amount)
- Run by a board of directors
Cooperative Advantages
- Limited liability
- Status as a separate entity, can continue after owner leaves
Cooperative Disadvantages
- Costly and complex to incorporate
- Requires legal fees
- Requires formalized financial statements for government agencies
Franchise
- Company A (franchiser) grants rights (name, procedures, designs) to Company B (franchisee)
- Franchisee buys license to a ready-made business model
- Example: McDonald's, IKEA
- Independent businesses affiliated for franchise agreement
Franchise Advantages
- Brand recognition
- Provided training and quality control standards
Franchise Disadvantages
- Initial franchise fees
- Monthly franchise fees (often percentage of sales)
- Advertising fees (often percentage of sales)
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Description
Explore various business ownership structures including sole proprietorships, partnerships, corporations, franchises, and cooperatives. This quiz will test your knowledge on the advantages and disadvantages of each structure, particularly focusing on sole proprietorships. Get ready to dive into the world of business ownership!
