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?

<p>It is owned by the customers or workers who use its services. (B)</p> Signup and view all the answers

What distinguishes private corporations from public corporations?

<p>Private corporations cannot be traded on public stock exchanges. (D)</p> Signup and view all the answers

Which of the following best describes a franchise?

<p>It is a legal business agreement to open a company in different locations. (A)</p> Signup and view all the answers

How are dividends distributed in a corporation?

<p>They are a fraction of profit paid to shareholders. (A)</p> Signup and view all the answers

What defines a general partnership?

<p>All partners share unlimited liability for business debts. (D)</p> Signup and view all the answers

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

<p>Members of a co-operative each have one vote regardless of shares owned. (D)</p> Signup and view all the answers

How do shareholders relate to a public corporation?

<p>They purchase shares to become owners of the company. (A)</p> Signup and view all the answers

Which of the following best describes a franchise operation?

<p>The franchisee uses the name and methods of the franchiser under specific licensing. (B)</p> Signup and view all the answers

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

<p>Public corporations list their shares on stock exchanges for broader investment. (B)</p> Signup and view all the answers

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

<p>They own shares and govern the co-operative's operations. (A)</p> Signup and view all the answers

Why might individuals choose to start their own business?

<p>To achieve financial independence and potentially earn more than traditional employment. (C)</p> Signup and view all the answers

What is a distinguishing characteristic of a crown corporation?

<p>It is operated by a provincial or federal government. (B)</p> Signup and view all the answers

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

<p>According to how much each member spends at the co-operative. (C)</p> Signup and view all the answers

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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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