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Sole Proprietorship
 Owned and operated by one person
 Most uncomplicated way to do business today
 Responsible for all of the firm’s debts and solely entitled to all of
their profits
 All financial affairs are confidential; do not have to answer to
anyone
 Name and business particulars of the firm need to be registered
with the provincial gov’t only when a name other than the real name
of the proprietor is being used.
 Most are required to have a municipal permit for operating the
business
 Biggest disadvantage is the unlimited personal liability-personal
assets can be seized to pay off outstanding business debts
 Sole owner must pay more personal income tax as the business
makes more money compared to a corporate business income tax.
(progressive tax)
 Still a very common form of business organization
The Partnership
 Firm of two or more people
 Bound by terms of a partnership agreement which governs all
business conduct of the partners and outlines the rights and
obligations
 Partnership is general or limited. General partners all take on
management duties and have unlimited personal liability for
business losses. In a limited partnership there would be at least one
general partner and the limited partners would not be permitted to
take part in management duties. They would also not be personally
liable for business losses other than their initial investment
 Must be registered with the provincial government and municipal
gov’t may require a permit
 Advantages is the pooling together of knowledge and talent which
can attract more capital (money, assets to invest in business) Easier
to obtain credit, lower interest rate
 Disadvantage- Progressive tax for partners, also not easy for
partners to sell his or her share
 Personality clashes, business disputes more common
The Corporation
 Public or private
 Private corporation shares can be traded privately with approval
from the board of directors
 Public corporation shares can be traded with supervision from the
provincial securities commission
 Can be established only through gov’t authorization
 Corporate assets are divided into equal parts called shares-These
ownership shares are made available to prospective buyers and can
be quickly re-sold through a stockbroker. The owners of the
corporation are called shareholders, and any given corporation can
have a few or thousands of shareholders. Shareholders elect a
board of directors for the day-to-day business.
 Investors are attracted to owning shares because they do not have
to assume responsibility for the operation of the firm.
 Common shares give you voting rights, preferred shares give a
shareholder a preferential position in regard to profits and assets
but it does not include voting rights
 Shareholders can vote at the annual general meeting.
 Advantages are profit distribution (profits from the end of the year
are often reinvested to finance further expansion; any profits that
are not invested are distributed to shareholders in the form of
dividends and paid on a per-share basis. Preferred shareholders
receive theirs first, and then the rest is divided among the
shareholders.
 Corporations can own property, incur debts, be sued and sue just
like a regular person. Any financial obligations are generally
considered part of the corporation not the individual owners
 Disadvantages-legal and gov’t fees for establishing a corporation are
high than sole proprietorships and partnerships.
 They are also more closely regulated by the government
 Another disadvantage is the personal incentive of its employees
(managers etc) is not as strong as the owner of the corporation. To
try and solve this they offer stock options, profit sharing,
performance bonuses etc.
The Co-operative Enterprise
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Business owned equally by its various members
Must have a common goal, economic purpose etc.
Retail co-ops have a common goal of selling goods at reduced prices
Financial co-ops are formed to arrange savings and loans for
members at better rates than those available a local banks
(example: credit unions)
Members have limited personal liability while maintaining all other
privileges of membership.
Advantages: one vote per member offers members an equal say in
management decisions
Any profits that are not reinvested are paid out to members in the
form of patronage returns. These are based on the amount of
business transacted by each member.
Disadvantage: difficult to make decisions if members have very
different views.
Also, they are only able to raise investment funds from existing
members, limited ability to raise capital.
Government Enterprise
 Provides services that the private sector will not because of the low
profits in relation to the capital invested.
 Government might establish an enterprise to provide competition or
to prevent total private control of key industries
 Most are operated like corporations (have the status of distinct legal
persons) The government holds all of most of the ownership shares
(example: CBC, Canada Post)
 At the provincial and municipal levels examples are electricity and
water businesses, NSLC, Housing etc.
 There has always been a debate on the merits of government vs
private enterprise