types of business ownership

BUSINESS FUNDAMENTALSTypes of Business Ownership

TYPES OF BUSINESS OWNERSHIP

Who is your boss?Who is your boss’s boss?

Can you become part owner?

Forms of business ownership and type of business help describe how the business is organized and run.

4 TYPES OF OWNERSHIP

1. Sole Proprietorship2. Partnership3. Corporation4. Co-operative

1. SOLE PROPRIETORSHIP

Owned by one person, who performs most roles and owns everything

Owner gets all profits, takes all the losses → called unlimited liability

Easiest and least expensive to set up Easiest for tax purposes → income recorded

under personal income

1. SOLE PROPRIETORSHIPADVANTAGES

owner makes all the decisions- hours of business, whom to hire

they are their own boss any profits belong to the owner

1. SOLE PROPRIETORSHIPDISADVANTAGES

the owner may lack the ability to buy the right supplies, do accounting etc

it the business loses money, so does the owner

creditors can claim the personal belongings of the owner

long hours if the owner is ill the business doesn’t

open

2. PARTNERSHIPS

Two or more individuals share costs and responsibilities

Terms of partnership recorded in partnership agreement

“silent” partners- partners that usually will front a lot of capital, but do not want to participate in business decisions – receive profits in return

2. PARTNERSHIPS

Two types of Partnerships can exist in a business: General partnership

All partners have unlimited liability (can be held responsible for the other partner’s business related debts)

Limited partnership Partners have limited liability (only

responsible for their share)

2. PARTNERSHIPSADVANTAGES two or more people share decision

making process one person may be better at one task

than the other partner sometimes easier to borrow money if

two people are involved

2. PARTNERSHIPSDISADVANTAGES share profits partners could disagree friendships can be lost over time as a

result

3. CORPORATION

Business with a legal status Can be as small as one person, or

multinational Some owned by individuals, families,

small groups

3. CORPORATION

Ownership often broken into small units, shares, which are sold through a stock exchange

(ie. TSX) → a publicly traded corporation

Those who buy: shareholders

3. CORPORATIONS

Since there are many owners, a board of directors runs corp.

Shareholders have limited liability, not responsible for debts

Get profits as dividends

3. CORPORATION TYPES

1. Private Corporation Only a few people control stock Not publicly traded

2. Public Corporation Sell shares to raise money 1 share = 1 vote;

those with most shares influence company decisions (usually orig. owner, execs)

3. Crown Corporation Business owned by the federal or provincial government Federal: VIA Rail, Canada Post, Bank of Canada Provincial: BC Transit, BC Lottery, BC Hydro, BC Museum

4. COOPERATIVES

Business owned by workers/those who use it

Run by board of directors Each member only gets 1 vote Profits shared based on use

Examples: Peninsula Co-op, Mountain Equipment Coop

(MEC)

FRANCHISE

A franchisor licenses the rights to the business to a franchisee for a fee

Franchisee runs business according to agreement Franchisee also pays monthly fee, has to purchase

product through franchiser, sometimes gets trained by franchiser, has to maintain uniform quality etc.

Examples: Tim Hortons, McDonalds, M&M Meats, Boston Pizza, UPS Store