1. Forms of Business Ownership
BBI2O Introduction to Business
Unit 1: Business Fundamentals
1.B Types of Businesses

2. Business Organizations
The 3 Most Common Form of Business Ownership
Sole proprietorships
Partnerships
Corporations

3. Comparisons of Forms of Business Organizations
Sole proprietorships Partnerships Corporations

4. Other Forms of Business Ownership
Co-operatives
Franchise

5. Factors in Choosing a Business Organization
Owner’s liability for firm’s debts
Ease and cost of forming the business
Ability to raise funds
Taxes
Degree of control the operator has
Ability to attract employees

6. SOME KEY DEFINITIONS
LIABILITY – the amount that owner’s are responsible for the company’s debts.
(ie. if bankrupted, who can creditors legally get money from…)
Capital – money available for investment purposes, such as starting a business and keeping it running

7. SOLE PROPRIETORSHIP Is a business owned and operated by one person
The owner is responsible for all operations/decision making in the business and assumes all of the risk
Responsible for all for production, sales, marketing, accounting etc.
More than 1,000,000 of these exist in Canada
Takes no formal documents to start up

8. Sole Proprietorships Advantages Easy and inexpensive to form
Owner keeps all profits
Direct control, “own boss”
Disadvantages
Unlimited liability
Difficulty in raising capital
May have limited expertise
- Personal time commitment
Owner absorbs all losses

10. EXAMPLE OF A SOLE PROPIETORSHIP
Carpenters
Hair salons
Convenience stores
Plumbers

11. PARTNERSHIPS
Form of business organization in which two or more people own and operate the business together
Are more complex to set up then sole proprietorships
Must be set up with a formal partnership agreement
This includes things like how profits will be divided, who will invest what, who will be responsible for what, how the partnership will be ended
If you violate this agreement your partner could take you to court

12. Partnerships Advantages Disadvantages Relatively easy to start up
Availability of capital
Diversity of skills and expertise
Flexibility
No special taxes
Disadvantages
Unlimited liability…no matter how much you personally have invested in the business
Potential for conflict between partners
Sharing of profits
Difficulty in leaving or ending a partnership

13. EXAMPLES OF PARTNERSHIPS
Lots of professionals form partnerships
ie. Dentists, Vets, Accountants, CFPs (certified financial planners), Insurance Agents, Engineers, Architects
Business Trivia Story:
Roots started out as partnership in 1973, between two friends. The friends where from Detroit, Michigan and had attended summer camp together in Algonquin park. Today they have over 2,000 employees in Canada and $300 million in sales.

14. JOKE BREAK What to vegan zombies eat?
GRAAAAAAAAAAAAAAAAAAAINS!!!!!!!!!

15. CORPORATION
A legal entity that exists independently from it’s owners. A corporation has the same rights and obligations as a citizen under Canadian law
Ex. A corporation can own assets, can sue and be sued, can be criminally and civilly liable.
The owners of a corporation are called shareholders

16. Video Clip ….

17. CORPORATION CONTD. Owners/shareholders Board of directors Officers
(elect board of directors)
Board of directors
(hire officers)
The structure of
a large public
corporation
Officers
(set corporate objectives, select managers)
Managers
(supervise employees)
Employees

18. 3 TYPES OF CORPORATIONS (+1)
Private corporation – can only have up to 50 shareholders
Shares are not sold on the public stock exchange
Ex. McCain foods
Public corporation – no restrictions on the number of shareholders
Share are sold on the public stock exchange (I.e. TSX, NYSE)
Ex. Ford, McDonald’s

19. 3 TYPES OF CORPORATIONS (+1)
Crown corporation –owned by government (federal, provincial, and/or municipal)
the goal is usually to provide a special service to the public
Ex. Canada Post, CBC
Non-profit corporation – goal not to make profit, but to undertake fundraising, carry out research or promote a cause
Ex. Canadian Cancer Society, The United Way

20. A LITTLE MORE ON CORPORATIONS
A corporation is brought into existence by drawing up a set of documents called “The articles of incorporation” and filling paperwork with the government
Corporations also have to pay a corporate tax rate

21. Corporations Disadvantages Advantages
limited liability… no one person is responsible for the debt of the company.
easy transfer of ownership
unlimited life-span
ability to attract financing
Disadvantages
double taxation of profits
cost and complexity of formation
more government regulations and restrictions

22. Other special forms of ownership
Cooperatives
a legal entity collectively owned by individuals or businesses with a strong common interest
profits distributed to the members in proportion to their contributions
Members share the start up cost
Many different types of co-ops: farm co-ops, consumer co-ops: i.e. MEC, credit unions

23. Cooperatives Advantages Members own and control the business
Shared startup costs and financial risk
Members may pay less for goods and services offered by the co-op
Disadvantages
Each member only has one vote, so some may not want to invest money for expansion, etc
Members can have conflicts

24. Specialized Forms of Business Organizations
Franchises: a business organization in which a franchisor supplies the product concept to the franchisee, who sells the goods or services in a certain geographical area
The franchisor states how the business must be operated ie. how advertising is to be done and what products are offered
One of the fastest forms of business ownership
Ex: Tim Hortons, McDonald’s

25. Franchises Disadvantages
Franchisees can buy a business with a good reputation
Franchisors supply training and financial knowledge
Franchisors usually provide packaging, advertising & equipment
Disadvantages
Can be expensive to buy
Many strict rules to follow
If a franchisor’s business fails, so will the franchisee’s business

26. Top 10 Franchises for 2010 Source:www.entreprenuer.com’s Franchise 500