1. Forms of Business Ownership
Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

2. Learning Goals
Compare the advantages and disadvantages of sole proprietorships.
Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships.
Compare the advantages and disadvantages of corporations.
Define and give examples of three types of mergers, and explain the role of leveraged buyouts and taking a firm private.
Outline the advantages and disadvantages of franchises, and discuss the challenges of global franchising.
Describe the role of co-operatives in Canada.
Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

3. 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.
Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

4. Sole Proprietorship Advantages Disadvantages Ease of start/end
Be your own boss
Pride of ownership
Leave legacy
Retain profit
No special taxes
Unlimited liability
Limited financial resources
Management difficulties
Overwhelming time commitment
Few fringe benefits
Limited growth
Limited lifespan
Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

5. Partnership Disadvantages Advantages More financial resources
Shared management, knowledge
Longer survival
Shared risk
No special taxes
Unlimited liability
Division of profits
Disagreements among partners
Difficult to terminate
Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

6. 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
Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

7. Corporation Advantages Disadvantages Extensive paperwork
Limited liability
More money for investment
Size-may be larger due to increased resources
Perpetual life
Ease of ownership change
Ease of attracting talented employees
Separation of ownership from management
Extensive paperwork
Double taxation
Two tax returns
Size-may become too inflexible to new ideas
Termination difficult
Stockholder and board conflict
High initial cost
Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

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

9. Franchises Advantages Disadvantages
Management and marketing assistance
Personal ownership
Recognized name
Financial advice and assistance
Lower failure rate
High start-up costs
Shared profit
Management regulation
Coattail effects
Restrictions on selling
Fraudulent franchisors
Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

10. 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”
Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

11. Just Us Coffee
Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

12. Reflections
Taking into consideration your strengths and weaknesses what type of business ownership do you think would be right for you. Explain your response.
Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson