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Organization of Business Sole Proprietorships Partnerships Corporations Cooperatives Public / Government Enterprises
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Sole Proprietorships One person owns & operates the business Most common type of business organization Appropriate for small market where good / service is not mass produced (e.g. accounting, dentistry, engineering)
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Sole Proprietorships Advantages Disadvantages Sole decision maker Keep all the profits Easy to start Limited money (capital) to start investment No specialization which means a lot of work for owner Severe financial risk with unlimited liability Hard to attract workers looking for permanent work because long term future unsure
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Partnerships Two or more people enter a business as owners and share the profits / losses based upon an oral or written agreement specifying the money, skills, workload and authority of each partner Commonly found in farming, the professions (e.g. law), restaurants, construction and repair work
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Partnerships Advantages Disadvantages More capital can be raised Workload shared allowing for vacations & specialization Sounder business decisions can be made Partners can have disagreements Unlimited liability for debt can hurt partner who is not responsible for poor business decisions When one partner dies or leaves a new partnership agreement must be made
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Corporations Has an existence of its own separate from those who created it or own it Crown-owned or controlled by the government (e.g. CBC) Business-owned and controlled by private individuals (e.g. Bell Canada Enterprises)
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Corporations Weaknesses of sole proprietorships and partnerships led to corporations being formed Stock Market is an organized market where corporations can sell shares or ownership in their company
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Corporations Advantages Disadvantages Limited liability which means only personally liable for the amount of money you have invested in the company Easier to raise capital for the business (e.g. retained earnings, securities like preferred & common shares, bonds) Unaccountable management may act selfishly against the best interests of the shareholders Management less motivated to be successful if they don’t have ownership stake in company
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Corporations Advantages Disadvantages Longevity Specialization through mass production Expensive to establish Double taxation
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Cooperatives Organized with the aim of benefiting its owners through lower prices and / or distribution of surpluses at the end of the year Like a corporation with shares sold but unlike a corporation despite how many shares you own only one vote per person
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Cooperatives Advantages Disadvantages democratic and fair little motivation to work harder than others
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Public / Government Enterprises Federal, provincial, and municipal governments produce a wide array of goods and services in Canada from garbage disposal to medical services Crown corporations are semi-independent (e.g. Canada Post)
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Public / Government Enterprises Produces goods and services that are essential to a community at a reasonable price To reduce debt and inefficiency crown corporations have been sold off to the public i.e. privatization (e.g. Air Canada, 407)
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