Stage 8 Organizing Your Business

 Liability – For a business, it includes the responsibility to pay all normal debts and to pay because of a court order or law, for performance under a contract, or payment of damages to a person or property in an accident. NEW WORD to KNOW!

Basic Forms of Ownership  Sole Proprietorship: a business that is owned, and usually managed by, one person in the community.  Partnership: two or more persons agree to be co-owners of a business.  Corporation: a legal entity with authority to act and have liability separate from its owners.

Forms of Business Organization Sole Proprietorship Advantages  Simple and inexpensive to start  Individual control over operations  All profit to the owner  Losses deductible from any other income Disadvantages  Unlimited liability  More difficult to obtain financing  Limited resources and opportunity  Overwhelming time commitment

Forms of Business Organization Partnership Advantages  Pooling of financial resources and talents  Simplicity and ease of organization  Increased ability to obtain capital  Potential for growth Disadvantages  Unlimited liability  Divided authority  Division of Profit  Disagreements among partners  Difficult to terminate

How to Form a Partnership  Choose your partner carefully  Get a partnership agreement in writing  Types of Partners  General - unlimited liability; involved in company business  Limited - limited liability; not involved in company business

Forms of Business Organization Corporation Advantages  Limited liability  Continuity of the business  Easier to raise capital  Potential employee benefits  Tax advantages  Ease of attracting employees  Separation of ownership and management Disadvantages  Cost  Legal formalities  Inability to flow losses through to the shareholders  Termination difficult  Size – inflexible to new ideas

Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson Corporations oPublic - Shares are traded on one or more stock exchanges. oPrivate - Not traded on any stock exchange and is limited to 50 or fewer stockholders.

Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson Cooperatives  Owned by the members and customers  Profits are shared amongst the members who pay an annual membership fee.  Co-workers, farmers, fishermen, consumers, etc. band together to form “co- ops”

Franchises o Management and marketing assistance o Personal ownership o Recognized name o Financial advice and assistance o Lower failure rate o High start-up costs o Shared profit o Management regulation o Coattail effects o Restrictions on selling o Fraudulent franchisors AdvantagesDisadvantages

Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson Franchising Terminology  Franchise Agreement: An arrangement whereby someone with a good idea for a business sells the rights to use the business name and sell its products in a given territory.  Franchisor: A company that develops products concept and sells other the rights to make and sell the products

Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson Franchising Terminology  Franchisee : A person who buys a franchise  Franchise: The right to use a specific business’s name and sell its goods or services in a given territory.

 Licences and Permits  Municipal  Provincial  Land Use and Zoning  Mandatory Deductions  Income Tax  Employment Insurance  Canada Pension Plan  Taxes  Provincial Sales Tax  GST/HST  Employment Standards  Insurance Other Legal Requirements

Types of Insurance 1.General Liability Insurance 2.Business Premises Insurance 3.Business Use Vehicle Insurance 4.Business Interruption or Loss-of-Income Insurance 5.Disability or Accident and Sickness Insurance 6.Key Person Insurance 7.Credit Insurance 8.Surety and Fidelity Bonds 9.Partnership Insurance 10.Workers’ Compensation

 Give examples of each type of ownership in the Campbellton area.  Sole Proprietorship  Partnership  Corporation Examples in the region

Franchise assignment

Assignment  What type of business ownership do you believe is right for you? (Don’t forget to explain your choice)