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MGMT Chapter 4 Notes (88-91) - Forms of Business
Introduction to Business (MGMT 1000)
University of Guelph
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MGMT CHAPTER 4 NOTES Forms of Business Pages 88 91 FORMS OF BUSINESS OWNERSHIP (PG 88): SOLE owned and usually operated one person who is responsible for all of its Majority of businesses in Canada are sole proprietorships. Can be big or small but usually small businesses. freedom, answer to yourself only, easy to form, if business under your own name you need to register a business name, low startup costs unlimited liability (personally liable for all business debts), if bills be paid out of business, the person is still responsible, lack of continuity as the business shuts down if owner dies. Lastly the business owner is entirely responsible for all aspects of the biz. Hard to get loans business with two or more owners who share in the operation of the firm and in financial responsibility for the debts Two basic types of partners in a and Partners General A partner who is actively involved in managing the firm and has unlimited liability. Most common partnership. Limited A partner who generally does not participate actively in the business, and whose liability is limited to the amount invested in the partnership but do not participate in the day to day activities ability to grow adding talent and money. Easier to borrow money than sole proprietorships. Simple to organize with few legal requirements. Begins with a agreement of some kind (written, oral or unspoken) strictly a private document as nothing legal required Unlimited liability. Lack of continuity (dies with partner). Difficult to transfer ownership as no partner may sell out without others consent. No guidance to resolve disputes CORPORATION A business is considered law to be a legal entity separate from its owners with many of the legal rights and privileges of a person: a form of business organization in which the liability of the owners is limited to their investment in the firm. business separate from its owners. Formation of a federal incorporation (if operating in more than one province) and provincial incorporation (operating in one province). Companies must have an Inc or Corp or Limited in company name. Advantages of Liability the money you invest in the company can be taken the government if the business fails and company assets. Government come after the investor personally. Continuity company can continue forever as shares of company can be sold or passed on to heirs. Better to get loans from banks. to setup is more expensive, need legal assistance,double (company pays tax on profits and shareholders pay personal tax on dividends). Investors who buy shares of ownership in the form of stock are the real owners of the corporation. Profits may be distributed to shareholders as dividends. Often corporations reinvest profits in the business COMMON Shares whose owners usually have last clai n the corporations assets (after creditors and owners of preferred stock) but who have voting rights in the firm. Dividends on common stock are paid on a per share basis. BOARD OF A group of individuals elected a shareholders and charged with overseeing and taking legal responsibility for the actions. Governing body of a corporation choose the President and other officers and delegate the running of the company to them. CHIEF EXECUTIVE OFFICER The highest ranking executive in a company or organization. Responsible for overall performance PUBLIC A business whose stock is widely held and available for sale to the general public. Shares of a public corporation are widely held compared to the shares of a private corporation where only a few hold shares. PRIVATE A business whose stock is held a small group of individuals and is not usually available for sale to the general public. INITIAL PUBLIC OFFERING Selling shares of stock in a company for the first time to a general investing public PRIVATE EQUITY Companies that buy publicly traded companies and then make them private LIMITED Investor liability is limited to their personal investments in the corporation courts cannot touch the personal assets of investors in the event the corporation goes bankrupt share of ownership in the Corporation
MGMT Chapter 4 Notes (88-91) - Forms of Business
Course: Introduction to Business (MGMT 1000)
University: University of Guelph
