forms of business organization

firms

Firms are created to make maximum profit by providing goods/services for which customers are willing to pay money for.

business ownership can be set up in 5 ways

sole proprietorship

least complicated

advantages

• Good if you want to be your own boss
• Keep your own financial affairs/business decisions
• Small scale 
• Confidentiality

DIsadvantages

• Unlimited personal liability of owner
• Business loans are tough/expensive to obtain
• Depending on how much money you're making you might pay more tax

Unlimited personal liability

progressive tax

partnership

no set form for the document

usually everyone is managing

limited partnership

advantages

• Pool talent/capital/motivation
• Few legal expenses/restrictions
• Good if you don't want to assume all of the risk
• Since there is a pool of funds, can attract more capital
• Easier for partnership to obtain credit/loans

Disadvantages

• Unlimited personal liability
• Joint liability, but if one person can't pay... several liability
• Progressive personal tax
• Tough for a partner to sell his/her share in the firm (approval)
• Partners can obtain investments funds only from within existing group

disputes

legally terminate partnership when...

corporation

separate entity in its own right

private corporation

public corporation

government authorization required

articles of incorporation

shares

shareholders

board of directors

common shares

preferred shares

shareholders vote on decisions

Advantages

• Profit distribution is nice (vote to reinvest)
• Profits not invested are distributed - dividends
• Limited personal liability - won't take your stuff!
• Less risky to invest in a corporation, attracts wide pool of investors
• Pay less tax 

Disadvantages

• Legal/government fees are expensive
• Close regulation by the government
• Annual meetings/financial statements tax return. Why is this bad?
• Reduced personal incentive - investors don't have much say

Co-operative enterprise

retail co-operatives

marketing co-operative

financial co-operative

service co-operatives

usually registered as corporations

each member gets a single vote

Advantages

• Everyone gets an equal say in management decisions
• Not really affected by death, insolvency, or incapacity
• Get items at better prices from the firm
• Limited personal liability
• Patronage - profits made that are not reinvested

Patronage returns - payments based on the amount of business transacted by each individual member. If someone sold 5% of the goods, they get 5% of the profit for the same period

DIsadvantages

• Decision making can be tough - so many equal people
• Voluntary/unpaid positions of officers may discourage capable people
• Raise funds only from existing members - limited ability to raise capital
• Restricted to conducting business with existing members (limits volume)

Government Enterprise

monopoly

canada is gradually privatizing

crown corporations

examples

• CBC
• Via Rail
• Canada Post

Responsibilities they take on

• Utilities (electricity/water)
• Liquor control
• Housing corporations
• Transit 

best interest of community

some argue private more efficient

Non-profit ORGANIZATION / charity

activities are income-tax exempt