1. Types of Business Ownership
Which type is Best for Your Venture?

2. Forms of Business Ownership
One of the first decisions that you will have to make as a business owner is how the company should be structured

3. Consider These Criteria
Your vision regarding the size and nature of your business
The level of control you wish to have
The level of "structure" you are willing to deal with
The business's vulnerability to lawsuits.

4. Consider These Criteria
Tax implications of the different ownership structures
Expected profit (or loss) of the business
Whether or not you need to re-invest earnings into the business
Your need for access to cash out of the business for yourself

5. What Are The Choices?
A legally constructed business may take one of the following forms:
Sole Proprietorship
Partnership
Corporation

6. Sole Proprietorships
The vast majority of small business start out as sole proprietorships
These firms are owned by one person
Usually the individual looks after the day-to-day running the business.

7. Sole Proprietorships
Sole proprietors own all the assets of the business and the profits generated by it
They also assume complete responsibility for any of its liabilities or debts
In the eyes of the law and the public, you are one in the same with the business

8. Sole Proprietorships ADVANTAGES DISADVANTAGES
quick, easy, and inexpensive to establish
limited in terms of employee compensation plans
only requires registration and appropriate licenses
all business income is taxable
owner makes all decisions
profits may be taxed at a higher rate than for an incorporated organization
owner includes all business profits/losses with personal income
harder to raise capital than for a partnership or a corporation

9. Partnerships
In a Partnership, two or more people share ownership of a single business.
Like proprietorships, the law does not distinguish between the business and its owners.
All partners may or may not be actively involved in the day-to-day operation of the venture.

10. Partnerships
Each partner contributes something toward the partnership:
Startup money
Material resources
Talent
Specialized skill
Experience
Specific knowledge
Business contacts.

11. Partnership Agreements
Partners should create a legal partnership agreement that outlines:
The time and capital each will contribute
How decisions will be made
How profits will be shared (percentage)
How disputes will be resolved
How future partners will be admitted to the partnership
How partners can be bought out
Terminating the partnership

12. Types of Partnerships General Partnership
Partners divide responsibility for management and liability, as well as the shares of profit or loss according to their internal agreement.
Equal shares are assumed unless there is a written agreement that states differently.

13. Types of Partnerships Limited Partnership
Most of the partners have limited liability based on the extent of their investment
Limited input regarding management decisions
Most partners are investors for short term projects, or for investing in capital assets

14. Types of Partnerships Limited Partnership
This form of ownership is not often used for operating retail or service businesses
Forming a limited partnership is more complex and formal than that of a general partnership

15. Types of Partnerships Joint Venture
Acts like a general partnership, but is clearly for a limited period of time or a single project
If the partners in a joint venture repeat the activity, they will be recognized as an ongoing partnership
If the partners in a joint venture repeat the activity, they will be recognized as an ongoing partnership and will have to file as such, and distribute accumulated partnership assets upon dissolution of the entity.

16. Types of Partnerships Silent Partnership One or more visible people
A person might invest money in the partnership but do not take an active part in the management of it
If the partners in a joint venture repeat the activity, they will be recognized as an ongoing partnership and will have to file as such, and distribute accumulated partnership assets upon dissolution of the entity.

17. Partnerships ADVANTAGES DISADVANTAGES
quick, easy, and inexpensive to establish
general partners assume unlimited liability for all debts/obligations incurred by the partnership
each partner may deduct business losses (in proportion to the amount invested in the business) from whatever is earned within the business
both business and personal income are taxed
favourable tax treatment, especially for startup losses
profits may be taxed at a higher rate than for an incorporated organization
combines the talents and resources of two or more people
unless otherwise stated in a partnership agreement, the partnership is automatically dissolved when one of the partners dies
if the partners can’t agree on the day-to-day operation of the partnership, decisions become difficult to make

18. Corporations
A corporation is constituted by law and is considered to be a distinct legal entity from its shareholders
This means it is separated and apart from those who own it
A shareholder’s liability for the corporations debts are limited to his or her investment
A corporation or limited company is a legal entity created by law, and established by corporate charter, that stands apart from the people who own it.
The corporation is able to enter agreements, own land and property, and hold contracts.
It can be sued and incur debts.
A corporation is a limited company because the liability of the shareholders or owners is limited to the amount of money that they originally invested in the corporation (or what they paid for the shares they purchased).
A corporation is often managed by a board of directors, which is elected by the shareholders. The board then appoints the president and other executives.
Profits are given out to shareholders based upon the number of shares each person holds.
When a corporation files the appropriate documents and gets approval to go public the shares can be publicly traded on a stock exchange.
Personal assets of shareholders can’t be claimed to cover debts or obligations that the corporation incurs.

19. Corporations
The goal of a corporation is to operate a business for profit and to distribute the profits among the shareholders
A corporation can be taxed; it can be sued; it can enter into contractual agreements
The owners of a corporation are its shareholders
A corporation or limited company is a legal entity created by law, and established by corporate charter, that stands apart from the people who own it.
The corporation is able to enter agreements, own land and property, and hold contracts.
It can be sued and incur debts.
A corporation is a limited company because the liability of the shareholders or owners is limited to the amount of money that they originally invested in the corporation (or what they paid for the shares they purchased).
A corporation is often managed by a board of directors, which is elected by the shareholders. The board then appoints the president and other executives.
Profits are given out to shareholders based upon the number of shares each person holds.
When a corporation files the appropriate documents and gets approval to go public the shares can be publicly traded on a stock exchange.
Personal assets of shareholders can’t be claimed to cover debts or obligations that the corporation incurs.

20. Corporations
The shareholders elect a board of directors to oversee the major policies and decisions of the corporation
The corporation has a life of its own and does not dissolve when ownership changes
A corporation or limited company is a legal entity created by law, and established by corporate charter, that stands apart from the people who own it.
The corporation is able to enter agreements, own land and property, and hold contracts.
It can be sued and incur debts.
A corporation is a limited company because the liability of the shareholders or owners is limited to the amount of money that they originally invested in the corporation (or what they paid for the shares they purchased).
A corporation is often managed by a board of directors, which is elected by the shareholders. The board then appoints the president and other executives.
Profits are given out to shareholders based upon the number of shares each person holds.
When a corporation files the appropriate documents and gets approval to go public the shares can be publicly traded on a stock exchange.
Personal assets of shareholders can’t be claimed to cover debts or obligations that the corporation incurs.

21. Corportaions ADVANTAGES DISADVANTAGES
corporations have an unlimited life, so day-to-day business continues despite the illness or death of their owners
more costly to set up because of government fees, name searches, legal fees
ownership is easily transferred
requires more formal annual activities (annual meeting, minutes, report)
profits can be removed from the corporation in the form of dividends, which can be a tax benefit to the owner
losses cannot be used by the owner to offset personal income
the corporation can arrange for employee benefits such as group insurance or registered pension plans
owner’s personal assets can still be seized by the lending agency if he or she has put up personal collateral for a business loan

22. Franchises
A firm expands into new markets by selling the rights to use the company's name and products to individuals
Franchising company provides training services and an advertising campaign for the purchaser of the franchise
A corporation or limited company is a legal entity created by law, and established by corporate charter, that stands apart from the people who own it.
The corporation is able to enter agreements, own land and property, and hold contracts.
It can be sued and incur debts.
A corporation is a limited company because the liability of the shareholders or owners is limited to the amount of money that they originally invested in the corporation (or what they paid for the shares they purchased).
A corporation is often managed by a board of directors, which is elected by the shareholders. The board then appoints the president and other executives.
Profits are given out to shareholders based upon the number of shares each person holds.
When a corporation files the appropriate documents and gets approval to go public the shares can be publicly traded on a stock exchange.
Personal assets of shareholders can’t be claimed to cover debts or obligations that the corporation incurs.

23. Franchises
Purchaser agrees to meet certain quality standards, provide certain products, and pay a franchise fee to the franchising organization
A corporation or limited company is a legal entity created by law, and established by corporate charter, that stands apart from the people who own it.
The corporation is able to enter agreements, own land and property, and hold contracts.
It can be sued and incur debts.
A corporation is a limited company because the liability of the shareholders or owners is limited to the amount of money that they originally invested in the corporation (or what they paid for the shares they purchased).
A corporation is often managed by a board of directors, which is elected by the shareholders. The board then appoints the president and other executives.
Profits are given out to shareholders based upon the number of shares each person holds.
When a corporation files the appropriate documents and gets approval to go public the shares can be publicly traded on a stock exchange.
Personal assets of shareholders can’t be claimed to cover debts or obligations that the corporation incurs.

24. Franchises ADVANTAGES DISADVANTAGES
Smaller than usual capital investment
Possible high franchiser fee
Prior public acceptance of product
Some loss of independence
Better than average profit margins
Possible difficulties in canceling contract
Management assistance