Forms of Business Ownership

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Questions and Answers

What is a significant disadvantage of operating a sole proprietorship?

The owner has limited liability.

The owner must share profits with partners.

The owner may lose personal assets if the business incurs debt. (correct)

The owner pays corporate taxes on profits.

Which of the following statements correctly describes a corporation?

It must be a public corporation to be legally recognized.

It provides limited liability for its shareholders. (correct)

It is always owned by a single individual.

It operates without any legal obligations or liabilities.

What is one advantage of forming a partnership?

Partners can individually claim all profits without sharing.

Partners have no need for a partnership agreement.

Partners share unlimited liability for the firm's debts. (correct)

Partners can operate without any shared responsibilities.

What is a key characteristic of a co-operative?

It is owned by the customers or workers who use its services. Signup and view all the answers

What distinguishes private corporations from public corporations?

Private corporations cannot be traded on public stock exchanges. Signup and view all the answers

Which of the following best describes a franchise?

It is a legal business agreement to open a company in different locations. Signup and view all the answers

How are dividends distributed in a corporation?

They are a fraction of profit paid to shareholders. Signup and view all the answers

What defines a general partnership?

All partners share unlimited liability for business debts. Signup and view all the answers

What defines a co-operative as opposed to a traditional corporation?

Members of a co-operative each have one vote regardless of shares owned. Signup and view all the answers

How do shareholders relate to a public corporation?

They purchase shares to become owners of the company. Signup and view all the answers

Which of the following best describes a franchise operation?

The franchisee uses the name and methods of the franchiser under specific licensing. Signup and view all the answers

What is a key difference between a public corporation and a private corporation?

Public corporations list their shares on stock exchanges for broader investment. Signup and view all the answers

What primary function do boards of directors serve in a co-operative?

They own shares and govern the co-operative's operations. Signup and view all the answers

Why might individuals choose to start their own business?

To achieve financial independence and potentially earn more than traditional employment. Signup and view all the answers

What is a distinguishing characteristic of a crown corporation?

It is operated by a provincial or federal government. Signup and view all the answers

How do the profits of a co-operative get distributed among its members?

According to how much each member spends at the co-operative. Signup and view all the answers

Study Notes

Forms of Business Ownership

Sole Proprietorship: Owned and operated by one person with unlimited liability.
- The owner bears full responsibility for the debts.
- Easier to set up compared to other forms of business.
Partnership: Formed by two or more individuals sharing costs and responsibilities.
- General partnership is the most common, where all partners have unlimited liability for debts.
- Partners define their roles and responsibilities in a partnership agreement.
Corporation: A distinct legal entity separate from its owners (shareholders).
- Shares (stocks) represent ownership.
- Dividends, a portion of the corporation's profits, are distributed to shareholders.
- Private Corporation: Owned by a small group of individuals, shares are not sold to the public.
- Public Corporation: Raises capital through public offering of shares on stock exchanges.
- Crown Corporation: Owned and operated by a provincial or federal government.
Co-operative: Owned by workers or members who consume its products or services.
- Emphasizes service, not profit maximization.
- Profits are distributed among members based on their spending.
Franchise: A business model where a franchiser licenses its brand and operating procedures to a franchisee.
- Franchisees pay an initial fee and ongoing monthly fees.
- The franchiser provides training, standardized operating procedures, and often controls supplies.
- Examples: McDonald's, Subway

Advantages and Disadvantages of Business Ownership

Advantages:
- Financial independence
- Potential for higher earnings
- Control over decisions
Disadvantages:
- Unlimited liability (sole proprietorship and general partnership)
- High initial investment
- Risk of failure
- Long hours and hard work

Types of Businesses

Service Businesses: Provide intangible services, like accounting or consulting.
Not-for-Profit Organizations: Focus on social impact, typically not profit-driven.
Retail Businesses: Sell goods directly to consumers.
Manufacturing Businesses: Produce goods, such as cars or electronic devices.

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Description

This quiz explores the various forms of business ownership including sole proprietorships, partnerships, and corporations. You will learn the key features, advantages, and disadvantages of each type. Test your understanding of how these entities operate and their legal implications.