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A non-profit organization's income is subject to income tax.
A non-profit organization's income is subject to income tax.
False
To qualify as a charity, an organization must register under the ITA.
To qualify as a charity, an organization must register under the ITA.
True
A main requirement for a charity is that it must promote a private benefit.
A main requirement for a charity is that it must promote a private benefit.
False
NFP corporations gain the capacity rights similar to those of a natural person.
NFP corporations gain the capacity rights similar to those of a natural person.
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To be recognized as a charity, an organization only needs to have a charitable object.
To be recognized as a charity, an organization only needs to have a charitable object.
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The provisions in letters patent that conflict with the ONCA are automatically amended.
The provisions in letters patent that conflict with the ONCA are automatically amended.
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Non-profit organizations can only be established as incorporated entities.
Non-profit organizations can only be established as incorporated entities.
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NFP organizations must ensure that their by-laws conflict with new legislation at all times.
NFP organizations must ensure that their by-laws conflict with new legislation at all times.
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Partners in a partnership are liable only for their own negligence.
Partners in a partnership are liable only for their own negligence.
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A partner's interest in a partnership can be sold as an interest in individual assets.
A partner's interest in a partnership can be sold as an interest in individual assets.
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Judgments against an LLP for negligence are enforceable against all partners.
Judgments against an LLP for negligence are enforceable against all partners.
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Co-owners are considered agents for each other in a business context.
Co-owners are considered agents for each other in a business context.
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The income of a partnership is not taxed as a separate entity.
The income of a partnership is not taxed as a separate entity.
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Decisions can be made by majority rule in a partnership, even against the will of the minority.
Decisions can be made by majority rule in a partnership, even against the will of the minority.
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If co-owners want to make binding business decisions, they must form a partnership.
If co-owners want to make binding business decisions, they must form a partnership.
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The capital cost allowance (CCA) is a deduction considered in computing the income of a partnership.
The capital cost allowance (CCA) is a deduction considered in computing the income of a partnership.
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Co-ownership implies a legal partnership between the owners.
Co-ownership implies a legal partnership between the owners.
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A corporation is a legal entity separate from its shareholders.
A corporation is a legal entity separate from its shareholders.
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Shareholders in a corporation have unlimited liability for the corporation's debts.
Shareholders in a corporation have unlimited liability for the corporation's debts.
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In a co-ownership, each co-owner has the ability to dispose of their share without agreement from other co-owners.
In a co-ownership, each co-owner has the ability to dispose of their share without agreement from other co-owners.
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Corporations can incur liabilities that exceed the value of their assets.
Corporations can incur liabilities that exceed the value of their assets.
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Shareholders own the property of the corporation directly.
Shareholders own the property of the corporation directly.
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Ontario imposes a corporate minimum tax based on financial statement income.
Ontario imposes a corporate minimum tax based on financial statement income.
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The rights and liabilities of a corporation are the same as those of its shareholders.
The rights and liabilities of a corporation are the same as those of its shareholders.
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A sole proprietor is required to register their business name if it is different from their own name.
A sole proprietor is required to register their business name if it is different from their own name.
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Sole proprietors can limit their personal liability exposure solely through contracts.
Sole proprietors can limit their personal liability exposure solely through contracts.
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The first fiscal period for a newly established sole proprietorship can end on any date chosen by the proprietor.
The first fiscal period for a newly established sole proprietorship can end on any date chosen by the proprietor.
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A sole proprietor does not need to report income from their business in the first fiscal year if they do not voluntarily disclose it.
A sole proprietor does not need to report income from their business in the first fiscal year if they do not voluntarily disclose it.
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A franchisor can expand operations more quickly by utilizing its own financial resources.
A franchisor can expand operations more quickly by utilizing its own financial resources.
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There is normally a fiduciary duty owed by a franchisor to a franchisee.
There is normally a fiduciary duty owed by a franchisor to a franchisee.
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Leave of the court is necessary for a sole proprietor to defend an action under a name that is not registered.
Leave of the court is necessary for a sole proprietor to defend an action under a name that is not registered.
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Municipal, provincial, and federal licensing requirements do not need to be reviewed by sole proprietors before commencing business.
Municipal, provincial, and federal licensing requirements do not need to be reviewed by sole proprietors before commencing business.
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Franchise agreements that impose restrictions on the franchisee can be challenged if they are seen as a restraint of trade.
Franchise agreements that impose restrictions on the franchisee can be challenged if they are seen as a restraint of trade.
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Sole proprietorships can operate without a defined fiscal year.
Sole proprietorships can operate without a defined fiscal year.
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A master franchising relationship allows one party to operate multiple outlets in a specified area.
A master franchising relationship allows one party to operate multiple outlets in a specified area.
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Franchisees do not have any recourse against franchisors for unauthorized control over their businesses.
Franchisees do not have any recourse against franchisors for unauthorized control over their businesses.
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The income from the first fiscal period must be reported in the next fiscal year's tax return.
The income from the first fiscal period must be reported in the next fiscal year's tax return.
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Franchisors face challenges in predicting franchisee cash flow due to compensation complexities.
Franchisors face challenges in predicting franchisee cash flow due to compensation complexities.
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Franchising arrangements can only take the form of single outlet agreements.
Franchising arrangements can only take the form of single outlet agreements.
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Franchising allows franchisees to utilize their own capital for establishing outlets.
Franchising allows franchisees to utilize their own capital for establishing outlets.
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In a co-ownership arrangement, each partner is entitled to claim CCA based on their own tax circumstances.
In a co-ownership arrangement, each partner is entitled to claim CCA based on their own tax circumstances.
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Capital gains and interest losses cannot flow through a partnership to the partners.
Capital gains and interest losses cannot flow through a partnership to the partners.
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Limited partners in a partnership are allowed full deductions of business losses regardless of their investment.
Limited partners in a partnership are allowed full deductions of business losses regardless of their investment.
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Taxable income may influence a co-owner's decision to claim CCA in the current year or defer it to a later year.
Taxable income may influence a co-owner's decision to claim CCA in the current year or defer it to a later year.
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Each partner's share of income or loss is not included in computing their tax income.
Each partner's share of income or loss is not included in computing their tax income.
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Recent legislative changes have clarified the allocation of CCA within partnerships.
Recent legislative changes have clarified the allocation of CCA within partnerships.
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Partners in a limited partnership have complete flexibility in claiming losses without any limitations.
Partners in a limited partnership have complete flexibility in claiming losses without any limitations.
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Partnerships can act as tax shelters for investors under specific circumstances.
Partnerships can act as tax shelters for investors under specific circumstances.
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Study Notes
Sole Proprietorship
- A sole proprietorship is the simplest business structure
- It is relatively inexpensive to set up and requires few legal formalities
- The owner is solely responsible for all business debts and obligations
- All business income and assets belong to the owner
- Limited liability is not offered; personal assets are at risk
- Licensing requirements vary by jurisdiction
- The Business Names Act (BNA) in Ontario requires registration if operating under a name other than the owner's
- This includes trades, occupations, professions, services, and ventures with profit motives.
- Should be registered in Ontario's Business Registry.
Methods of Carrying on Business
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The federal Income Tax Act (ITA) mandates that individuals with business income report on a calendar year basis.
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Individuals can opt for a non-calendar fiscal year—provided the Minister of National Revenue agrees—to maximize income deferral.
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Section 34.1 of the ITA regulates non-calendar-year income calculations; it necessitates effectively calculating income on a calendar year basis.
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The example illustrates the calculation of income across a sole proprietor's fiscal and calendar year to ensure timely and accurate tax reporting
Partnerships
- A partnership is formed when two or more individuals or corporations conduct business together with profit as the objective
- Partners are each individually liable for all partnership debts.
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Types:
- General partnerships
- Limited liability partnerships (LLPs)
- Limited partnerships
- The Partnerships Act and the Limited Partnerships Act govern these types in Ontario
- Partners are agents for one another, holding authority concerning the business
- Partnership profits/losses are passed through to individual partners
Corporations
- A corporation is a separate legal entity distinct from its owners (shareholders).
- Shareholders' liability is limited to their investment
- Corporations can own property, conduct business, and incur obligations
- Each year, the corporation's income must be reported and taxed separately from that of its owners.
Joint Ventures
- A joint venture is a collaborative effort by two or more parties for a specific purpose or project, not a formal business entity; parties share responsibilities and profits.
- The specific terms and circumstances are outlined in agreements.
Franchises
- Franchises are contractual arrangements allowing one party (franchisee) to use another's (franchisor's) business model, brand, and operating methods.
- The franchisee pays fees and typically complies with the franchisor's standards
- The franchisor actively involves itself in the franchisee's day-to-day operations and business
- The Arthur Wishart Act (Franchise Disclosure), 2000 (AWA) in Ontario requires franchise disclosure documents to prospective investors.
Not-for-Profit/Charitable Organizations
- Not-for-profit (NFP) organizations and charities are different types of entities.
- NFPs typically engage in activities that benefit the community (e.g., social clubs, professional groups).
- Charities must be registered under the Income Tax Act to qualify for tax-exempt status and must comply with regulatory requirements
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Description
This quiz covers the fundamentals of sole proprietorships, including their structure, legal requirements, and financial responsibilities. It also discusses methods of carrying on a business and relevant tax regulations under the Income Tax Act. Test your understanding of these essential business concepts.
