Business Ownership Structures PDF

BUSINESS OWNERSHIP STRUCTURES BUSINESS FUNDAMENTALS CHUNK 4 SOLE PROPRIETORSHIP PARTNERSHIP CORPORATION FRANCHISE COOPERATIVE SOLE PROPRIETORSHIP This is a business owned by one person, referred to as the proprietor The owner owns all of the equipment, and is in charge o...

BUSINESS OWNERSHIP STRUCTURES BUSINESS FUNDAMENTALS CHUNK 4 SOLE PROPRIETORSHIP PARTNERSHIP CORPORATION FRANCHISE COOPERATIVE SOLE PROPRIETORSHIP This is a business owned by one person, referred to as the proprietor The owner owns all of the equipment, and is in charge of all business operations $ to start the business comes from personal savings or a loan Example Fernandez’s Lawn Care Services This is the Simplest of the Business Structures More than one million sole proprietorships exist in Canada, which means that it is the most common form of business in the country Local Example Ballard Business Solutions Owned by John Ballard Focusing on Bookkeeping for local businesses Also provide guidance for taxes ○ Personal ○ Business Consulting provided to ensure that data from accounting and bookkeeping systems provide support for management and operations ○ Growth potential and business strategies ADVANTAGES OF SOLE PROPRIETORSHIP It is the easiest form of ownership The owner has the ability to make quick decisions on their own, be their own boss and get all the profits for their work DISADVANTAGE OF SOLE PROPRIETORSHIP Unlimited Liability → the owner is responsible for the company’s debts ○ This means that personal assets can be sold to cover losses Like selling a house, car, etc Limited Life → the life of a company that has a sole proprietorship style of ownership only lasts as long as the proprietor Taxed at higher rates than Corporations PARTNERSHIP This is a business operated by 2 or more individuals They share the cost and responsibilities The terms of the partnership are recorded in the partnership agreement The portion of revenue and responsibilities does not have to be equal, which is why it is so important to have a specific and detailed partnership agreement  Local Example Vincenzo’s Waterloo First started off as a small house (converted into a store) called “Italian & Canadian Foods” A deli/market that specialized in Italian/mediterranean meats First owned as a Sole Proprietor Vincenzo Caccioppoli Now run by two sons Tony and Carmine who changed the store name Vincenzo’s in his honour Moved to two different locations Staple of the KW area ADVANTAGES OF PARTNERSHIP Easy to form Can pool economic resources of the partners Can pool different talents and skill sets Bank loans are easier to get when there are more people applying for the loan ○ Because the bank has a better chance of getting their money back DISADVANTAGES OF PARTNERSHIP Like a proprietorship, all general partners are liable for the company’s debt Disputes between partners are often a problem Determining what the partner is entitled to with regard to compensation is often extremely complex ○ Imagine me and my buddy run a store. My buddy owns the property the store is located on and we used $50 000 of his money to buy inventory. I run the day to day operations of the store and do all of the work that takes time but I did not invest any of my money for building or inventory. Once we sell all of the inventory, how should that money be divided? Partnerships are taxed at a higher rate than corporations CORPORATIONS Ownership is divided into parts called stocks (or shares) Individuals who buy shares become owners of the company Can be public (anyone can own shares) or private (only a select few can own shares) Run by board of directors Local Example Manulife Financial Provides insurance, benefits, saving plans, investments, wealth management, and banking solutions for individuals Provides companies benefit plans for their employees and provide smart business solutions ADVANTAGES OF CORPORATIONS Limited liability, this means that personal property not related to the business cannot be sold to pay off company debts Easy to raise capital (money) by selling more shares Has the status of a seperate life from the owners and can go on forever Taxed at a lower rate than sole proprietor and partnership DISADVANTAGES OF CORPORATIONS Costly and complex to incorporate ○ Legal fees More formalized financial statements must be made available to government agencies (and the public if they are a publicly traded company) COOPERATIVE This is a business owned by the workers or the members They buy the products or use the services the business offers Limited liability Run by board of directors Each member gets 1 vote regardless of the number of shares they own Can you think of any? ADVANTAGES OF COOPERATIVES Limited liability, this means that personal property not related to the business cannot be sold to pay off company debts Has the status of a seperate life from the owners and can go on forever DISADVANTAGES OF COOPERATIVES Costly and complex to incorporate ○ Legal fees More formalized financial statements must be made available to government agencies FRANCHISE Company A (franchiser) licenses (rents) the rights to its name, operating procedures, designs and business expertise to Company B (franchisee) Company B buys a license to a “ready made business” Franchisor and Franchisee are independent businesses that are affiliated for this agreement only This is a very popular business model in Canada, can you think of some? ADVANTAGE OF FRANCHISE Brand recognition of a product that consumers already like Training and quality control standards are provided DISADVANTAGE OF FRANCHISE Initial franchise fee Monthly franchise fee ( such as 5% of total sales) Advertising fee (such as 1% of total sales) Is a Franchise a good investment?