Business Organization and Finance

What is a Sole Proprietorship ? A form of business organization where one person owns and operates the business

How do they rank ? There are more sole Proprietorships than any other type business in Canada

How are they regulated ? Each province has its own regulations concerning these types of businesses.

Who makes the decisions? The person who has the business makes all of the production decisions. They also establish prices, whom to hire, provide the capital necessary, and collect all of the profits.

Financial risks Liable for the entire business from an economic perspective. They have to shoulder all financial rewards, as well as losses (unlimited liability) Could also lose their personal property. Difficult to sell the business.

Non ability to govern A new proprietorship has to be formed New ends with the person going to jail, sickness, death..etc.

Professions Accounting Dentistry Farming General Stores Restaurants

Partnership Business organization in which two or more individuals enter a business as owners and share property. Oral or written agreement between people

Advantages of a Partnership It can raise more capital than SP Divided responsibilities Shared expertise Business can continue to run even if a partner is sick.

Disadvantages Difficulty to reach agreements on certain issues such as salaries, Profits and losses, How/who to admit in the firm, Each partner has unlimited liability

Corporation Form of business that has an existence of its own separate from those who created or own it.

Types Crown Business

Crown Corporation Owned and controlled by some level of government. CBC, Hydro-Quebec

Business Corporations Companies owned by private individuals Loblaw's, Irving

Rights held by Corporations Legal Personality Hold property, enter in contracts, sue in court, and be sued.

How to establish Canadian Business Corporation…for establishing a business that operates between provinces Provincial Incorporation…businesses operates in one province.

Advantage Limited Liability….the person who invest in a corporation is not solely responsible for all of the debts, but only what they invested. (value)

Raising funds/capital Retain earnings of the corporation Issuing securities

Securities Used to raise funds for companies

Major Securities Common Shares- Part owner of a company. Purchased according to the value of a share Preferred Shares- stocks issues by a corporation that shows ownership of the company. Bonds-written promise to pay a stated sum of money at some time in the future. You are not an owner but a creditor.

Control of the corporation Shareholders control the corporation Board of directors control the company and make all of the decisions. Each share holder votes for the members of the BOD. A chairperson is elected by the BOID

More Advantages Last a long time Large amounts of Capital

Disadvantages Costly to set up: The start-up and administration fees are high because of the need to obtain charters and print shares and to appoint a board of directors and corporate officials. Impersonal character of management: In large corporations, employees may not have a high level of commitment to the company and work may be depersonalized. Double taxation: Corporations pay corporate taxes on their profits and the shareholders pay taxes on their dividends. BOD may be a highly selfish group that makes decisions in their own interest

Corporate Combinations Horizontal mergers combine two or more firms competing in the same market with the same good or service. Vertical mergers combine two or more firms involved in different stages of producing the same good or service. A conglomerate is a business combination merging more than three businesses that make unrelated products.

Multinationals Multinational corporations (MNCs) are large corporations headquartered in one country that have subsidiaries throughout the world. Advantages of MNCs Multinationals benefit consumers by offering products worldwide. They also spread new technologies and production methods across the globe. Disadvantages of MNCs Some people feel that MNCs unduly influence culture and politics where they operate. Critics of multinationals are concerned about wages and working conditions provided by MNCs in foreign countries.

business franchise A business franchise is a semi-independent business that pays fees to a parent company in return for the exclusive right to sell a certain product or service in a given area. Franchisers develop products and business systems, then local franchise owners help to produce and sell those products. Franchises allow owners a degree of control, as well as support from the parent company.

Advantages and Disadvantages of Business Franchises Advantages of Business Franchises Management training and support Standardized quality National advertising programs Financial assistance Centralized buying power Disadvantages of Business Franchises High franchising fees and royalties Strict operating standards Purchasing restrictions Limited product line

cooperative A cooperative is a business organization owned and operated by a group of individuals for their shared benefit. Cooperatives Consumer Cooperatives Retail outlets owned and operated by consumers are called consumer cooperatives, or purchasing cooperatives. Consumer cooperatives sell their goods to their members at reduced prices. Service Cooperatives Cooperatives that provide a service, rather than goods, are called service cooperatives. Producer Cooperatives Producer cooperatives are agricultural marketing cooperatives that help members sell their products.