1. Different Forms of Ownership BDP301

2. Choosing the Right Form of Ownership A new venture can be established as a: sole proprietorship, partnership, or a corporation Sole Proprietorship: there is only one owner. This person is entitled to all the profits, but also all the responsibilities and liabilities. Partnership: formal commitment between two or more people. Partners share profits and losses according to the percentages laid out in the agreement Corporation: A legal entity created by law and established by a corporate chart. The business stands along from the people who own it. It can be sued and incur debt.

3. Sole Proprietorship AdvantagesDisadvantages Quick, easy and inexpensive to establish Only need a registration and appropriate license Owner makes all the decisions Owner includes all profits/losses with personal income Limited in terms or benefits and compensation All business income is taxable (taxed at a higher rate than corporations) Harder to raise capital

4. Partnership AdvantagesDisadvantages Quick, easy and inexpensive to establish Partners may deduct business losses from whatever is earned Favourable tax treatment Combines the talents and resources of two people Partners assume unlimited liability for all debts/obligations Business and personal income are taxed Profits are taxed higher than corporations If one partner dies, the partnership automatically ends Depending on relationship, may be hard to come to agreements on daily operations

5. Corporation AdvantagesDisadvantages Day to day business will always continue despite death or owner Ownership is easily transferred and does not affect licenses Profits can be removed which is a tax benefit Employee benefit and pension plans are available Personal liability is limited More costly to set up, more government and legal fees More annual activities (meetings, reports) Losses can not be used to set off personal income Owners personal assets can still be seized by the lending agency

6. Franchises A franchise allows owners of successful businesses to duplicate it in another location Each location is independently owned and operates as a chain Each location uses the same equipment, trademark and design and produces the same product A franchise can be bought by a sole proprietorship, partnership or corporation

7. AdvantagesDisadvantages The owner gains the franchisers knowledge, image, success, management and marketing techniques instantly The owner of a franchise is not allowed to run the business as they see fit. You must follow the rules and guidelines as laid out in the franchisers agreement