1. Forms of Business Ownership
Futures/Start

2. 5 Forms of Business Ownership
Sole Proprietor
Partnership
Corporation
Franchise
Cooperative

3. Sole Proprietorship
A business that is owned and operated by one person

4. Sole Proprietorship Advantages Disadvantages
Simple to start/little cost
Unlimited liability:
Owner assumes responsibility for paying all debts/liabilities
Makes all decisions
Difficult to raise funds
Keeps all profits
Responsible for all functions of the business (“Jack of all trades, master of none”
Satisfaction of being one’s own boss
Limited life of the business
Easy to dissolve

5. Partnership
two or more people jointly share in the ownership and operation of a business
written contract/ agreement
written agreement partnership agreement
Limited partners (“Silent” Partners):
Just an investor; only liable to the extent of their capital investment in the company
Cannot participate in managing the company and may not withdraw the invested capital during the term of the partnership

6. Partnership Advantages Disadvantages Unlimited liability:
Simple to start/little cost
Unlimited liability:
Owner assumes responsibility for paying all debts/liabilities
Greater access to funds
Disagreements
Greater expertise (different areas of knowledge)
Difficult to dissolve

7. Corporation legal entity (body) that exists independent of its owners
Some business start off small and grow to be very large demanding a sizable investment in land, buildings and equipmentform a corporation
When a corporation wants to raise money for expansion or growthsell shares/stock to public to raise money
owners of a corporation shareholders

8. Corporation Organizational Chart

9. Stock Certificates

10. Shareholder Responsibility
meet at least once a year to vote and elect a Board of Directors
each shareholder is allowed one vote for each share owned
One share equals one vote 2000 shares equals 2000 votes

11. Profits of a Corporation
Profits of a corporation belong to shareholders
some of profit might be used to expand business (e.g., buy new equipment) and/or
Profit is given to shareholderscalled dividends
The amount of the “dividend per share” is determined by Profit to be paid out No. of shares held (dividing the amount of profit to be paid out by the number of shares held by shareholders)

12. Profits/Dividends cont’d
Example: If a company paid out $ of profit and there were shares, each share would have a dividend value of $2. $ profit = $2/per share shares (the owner of one share would receive $2, the owner of 2000 shares would receive $4 000)

13. Corporation
2 main types of Corporations: 1) Public Corporation: shares can be sold to the public (traded on the stock exchange) 2) Crown Corporation: owned by federal, provincial, or municipal governments (e.g., the Mint, Canada Post)

14. Corporation Set-Up How is a corporation started?
Articles of incorporation: document that is drawn up and filed with the government
Becomes company’s charter (rules that govern company’s operations)

15. Corporation – Advantages/Disadvantages
Limited liability: if the business fails, creditors take only the $ that the shareholder has invested (no personal property) [e.g., Mira’s Wedding Supplies Ltd.Ltd. Stands for “limited:”]
Complicated to start – very expensive (lawyers, government fees)
Continuous life – the business will not cease because one owner dies
Government regulation
Easy transfer of ownership: shareholders buy and sell shares without “company’s” permission
Little secrecy – documents (e.g., income statements) published and available to the public (if company is doing poorly, everyone knows it)
Ability to acquire funding: issue and sell shares to acquire money
High Taxes: pays taxes as a business and then pays profits (dividends) to shareholders which are then taxed again ”Double Taxation”
Specialized staff – larger staff with a variety of skills

16. Quick Quiz… What’s in Common?
Tim Horton’s
Robin’s Donuts
A & W Restaurants
Nutrilawn
Cinnebon
Harvey’s
Island Ink Jet
Subway
Extreme Pita
Sangster’s Health Food Stores

17. Franchise
A business which licenses the right to sell the company’s goods or services in a specific area
Franchisor:
“home office”the parent business that supplies the products/services to the individual franchise
Franchisee:
An individual owner of a franchise that sells the franchisor’s products or services to the public

18. Top 2010 Franchises Subway $84,300 - $258,300
McDonald's $995,900 - $1,842,700
7-Eleven Inc. $40,500 - $775,300
Hampton Inn/Hampton Inn & Suites $3,716,000 - $13,148,800
Supercuts $111,000 - $239,700
H & R Block $26,427 - $84,094
Dunkin' Donuts $537,750 - $1,765,300
Jani-King $11,400 - $35,050
Servpro $102,250 - $161,150
ampm Mini Market $1,835,823 - $7,615,065

19. Franchise – Advantages/Disadvantages
Expertise in doing business: franchisor supplies franchisee with easy-to-follow instructions”turn-key” operation
Expensive (initial fees, monthly/annual fees): initial fees very high; franchisee may pay operating fees, royalty fees, and advertising fees to franchisor
Training: all franchisees receive same training
Lack of Control: franchisee cannot make independent decisions about products; loses advantage of being own boss
Established Name Recognition: reputation of a known name
Image Problems: if other franchise stores do not maintain standards, may influence your store
Equipment, Packaging and Advertising: franchisor provides all to franchisee
Protected Territory: franchisor agree not to set up another franchise within a certain areano direct competition

20. Co-operatives
Members own and control the business and make all business decisions
Examples: Co-op Gas, Credit Unions, farmers
Regardless of the number of shares the member owns, each member only has one vote

21. Co-operatives cont’d
Profits are paid to shareholders based on volume of business (purchases) that they have made
Example:
Total Sales of a Business = $40 000
Ima Owner bought goods = $
Profit of company = $15 000
To calculate dividends paid to members: Sales to member x Profit Total Sales x = $
Called a Patronage Refund

22. Co-operatives – Advantages/Disadvantages
Members own and control the business
Difficult to raise additional funds – some people are reluctant to invest in a co-operative because they have only the same amount of control over the business over someone who has invested much less
Each member only gets one voteno one person or group of people can dominate the co-operative
Decision making – number of people involved
Profits paid to members (the more business they do, the more they get back in the form of a patronage refund)
Favourable prices because goods bought in large quantities