Three common forms of business ownership in Canada:
Sole proprietorships
Partnerships
Corporations
what are benefits to sole proprietorships?
Easy start-up and closure
Retention of all profits
Unlimited liability
General partner
person who shares responsibility for operating a business, and unlimited liability for the debts of the business
Limited partner
person who invests money in a business but has no management responsibility or liability for losses beyond the amount invested in the partnership
Corporations Include the right to:
Start and operate a business
Buy or sell property
Borrow money
Sue or be sued
Enter into binding contracts (e.g., obtain financing)
Public corporation:
a corporation whose shares are widely held and available to the general public
Private corporation
a corporation whose number of shareholders is limited , Normally restricts share transfer to third parties, Shares are not traded on a stock exchange
Key Factors When Choosing Ownership Structure
- Business control and transfer of ownership
- Taxation and division of profits
-Legal and financial liability protection
-Ease of start-up and administration
Type of ownership structure impacts:
Control
Ease of ownership transfer
If a member dies or retires:
Sole proprietorship ceases to exist
Partnerships can make provisions in their ownership documents to allow remaining business owners to continue
Corporations are separate entities and exist independently of the owners
Pass-through taxation:
occurs when an owner’s share of business profits is reported on individual tax returns
Prevalent in sole proprietorships and partnerships
Double taxation:
occurs when profits of a business are taxed at the entity level before profits are distributed to owners; distributions are reported on the owners’ individual tax returns as dividends and are taxed a second time
Dividend:
distribution of profits to the shareholders of a corporation
Unlimited liability
: legal concept that holds a business owner personally responsible for all the debts of the business
Limited liability
a feature that limits each owner’s financial liability to the amount of money that they have invested in the business
Consumer co-op:
provides products or services to its members
Producer co-op
markets goods or services produced by its members and/or reduces costs through group purchasing
Worker co-op
and operated by its employees to provide employment and limited liability
Multi-stakeholder co-op:
: includes more than one membership group
Shared Principles of Co-operatives:
Voluntary and Open Membership
Democratic Member Control
Member Economic Participation
Autonomy and Independence
Education, Training, and Information
Co-operation among Co-operatives
Concern for Community
