1. Business Organization
Economics 11/12

2. Let’s Review
Primary Industry
Secondary Industry
Service Industry

3. Forms of Business Organization
Economic activity = firms
Firms:
Designed to achieve maximum profit by providing goods and services for which customers are willing/able to pay

4. Sole Proprietorship Business owned and operated by one person
Solely responsible for profits or debts
Very common in Canadian economy
Ie. Small local business

5. Advantages
Own boss
Confidentiality
Any others?

6. Disadvantages Unlimited personal liability
- proprietor’s personal assets can be seized to pay outstanding debts
No one else to rely on for funds/run business
Difficult & expensive to obtain loans
Progressive income tax ( income = tax)

7. The Partnership Owned by 2 or more Bound by a partnership agreement
no one set form
outlines rights and responsibilities
General Partnership
All partners participate in management
Unlimited personal liability for business losses

8. The Partnership Limited partnership limited partners
at least one general partner
Not permitted to take part in management
Personally liable for debts only up to their initial investment
No additional personal assets can be seized
Ie. Law firm, architects, accountants

9. Advantages Pooling of talent & capital
Personal motivation & satisfaction
Attracts capital
Obtaining credit is easier & interest rate

10. Disadvantages Progressive income tax
Not easy to sell shares (approval)
Right to retire (no new partner)
Investment funds only from within (personal savings/mortgages)
Disputes
Legally terminates due to death, mental incapacitation, financially insolvent, breach of partnership

11. Advantage or Disadvantage?
Unlimited personal liability
Joint liability – all partners liable for debts
Several liability – partner doesn’t pay?
All other partners must pay debt

12. The Corporation
Public (shares traded freely) or private (shares traded only with approval)
Established ONLY with gov’t authorization
Shares = corporate assets, equal
Sold – stockbroker, stock market
Owners – shareholder (few – 1000’s) = $$$
Oldest – Hudson’s Bay Company

13. The Corporation Common shares Shareholder has voting rights
Preferred shares
Preferential position for profits and assets
No voting rights
Vote = in person or proxy

14. Advantages Profit distribution
Re-invest into firm = self financing = $
Dividends –$ not reinvested shareholders
- per share basis, Preferred, Common
Obligations responsibility of corp
Limited personal liability (investment)
investors = large scale
Shares transfer
Lower income tax

15. Disadvantages Gov’t fee much Closely regulated by gov’t
- books (all aspects), annual meetings, financial statements & tax returns
Privacy? (competition)
control

16. The Co-operative Enterprise
Equally owned
Must have common goal
Retail Cooperative – provide goods at reduced price
Financial Cooperative – arrange savings & loans at better rates than banks
Service Cooperatives – provides housing, medical insurance & equipment rentals
Popular in Western and rural Eastern Canada

17. The Co-operative Enterprise contd.
Each member has a single vote & majority wins
Board of Directors (annual)
Roles are voluntarily
Ie. Credit Unions

18. Advantages One vote = equal say
Obtain and sell goods at a better price
Limited personal liability
Patronage return – profit based upon amount of business transacted by each individual
1% of goods sold = 1% of profit

19. Disadvantages Decision making – equal say & different ideas
Unpaid positions discourage many
Investment funds only from members = less capital when needed
Business only with existing members = limited customers & business volume
Serve members NOT profit

20. The Government Enterprise
Owned by federal, provincial or municipal
Provide services that are costly
Set up to standardize services & jobs
Crown corporations – gov’t not person holds all/most shares
Ie. Canada Post, the CBC, Via Rail, Hydro One (ON)