Forms of Business OwnershipForms of Business Ownership

Forms of Business OwnershipForms of Business Ownership1.1. Sole Proprietorship Sole Proprietorship

owned by one personowned by one person

2. 2. Partnership PartnershipUsually owned by two or more partnersUsually owned by two or more partners

3. Cooperative3. CooperativeOwned by its workers or by members who buy from the businessOwned by its workers or by members who buy from the business

4. 4. Franchise FranchiseOne business licenses (allows) another to use its name, operating One business licenses (allows) another to use its name, operating procedure, etc.procedure, etc.Can have any form of ownershipCan have any form of ownership

5. Corporation5. Corporation

Business is an artificial “person” created by law and owned by Business is an artificial “person” created by law and owned by shareholdersshareholders

Sole ProprietorshipsSole ProprietorshipsPartnerhshipsPartnerhshipsCooperativesCooperatives

Sole ProprietorshipSole Proprietorship

Simplest form of business ownershipSimplest form of business ownership

One owner of a businessOne owner of a business

Sole ProprietorshipSole Proprietorship(over 1 million in Canada)(over 1 million in Canada)

Advantages Advantages Keep all the profitsKeep all the profits Make all the decisionsMake all the decisions You are your own You are your own

bossboss (i.e Financial (i.e Financial

information can be information can be kept secret. from kept secret. from competitors), but not competitors), but not the governmentthe government

DisadvantagesDisadvantages Unlimited LiabilityUnlimited Liability Facing personal and Facing personal and

financial risks and financial risks and challenges on your challenges on your ownown

Borrowing money Borrowing money may be more difficultmay be more difficult

Huge time Huge time commitmentcommitment

Sole ProprietorsSole Proprietors

Examples may include individuals who are:Examples may include individuals who are:

ArtistsArtistsAuthorsAuthorsCarpentersCarpentersComputer specialistsComputer specialistsDigital designersDigital designersEcotourism guidesEcotourism guidesFarmersFarmersIndustrial designersIndustrial designersPhotographersPhotographersWeb designersWeb designersChefs or BakersChefs or BakersHair stylistsHair stylists

PartnershipPartnership

More complex and needs a written agreementMore complex and needs a written agreement

Partners must discuss and agree on issues Partners must discuss and agree on issues such as:such as: how much time and money each partner will puthow much time and money each partner will put

into the business into the business How the profits will be sharedHow the profits will be shared Who will make decisions about different aspects ofWho will make decisions about different aspects of

the business the business Who will manage the employeesWho will manage the employees How the partnership might be endedHow the partnership might be ended

Partnership AgreementPartnership Agreement

All partners must sign the partnership agreement which All partners must sign the partnership agreement which includes:includes:

the name and location of the businessthe name and location of the business Its purposeIts purpose The amount of partner’s investmentThe amount of partner’s investment The way that the profits and losses are to beThe way that the profits and losses are to be

divided divided The duties and responsibilities of each partnerThe duties and responsibilities of each partner The procedures for ending the partnershipThe procedures for ending the partnership

PartnershipsPartnerships

AdvantagesAdvantages Inexpensive to set up Inexpensive to set up

and organize ($1000)and organize ($1000) Two people to invest and Two people to invest and

it is easier to borrow from it is easier to borrow from a banka bank

More brains filled with More brains filled with different knowledge, different knowledge, experience, skillsexperience, skills

Shared responsibility Shared responsibility eases stress and eases stress and workloadworkload

Share debt and can more Share debt and can more easily take a vacationeasily take a vacation

DisadvantagesDisadvantages Unlimited liabilityUnlimited liability

Your personal assets Your personal assets (home, care etc may (home, care etc may need to be used to pay need to be used to pay off business debts)off business debts)

Conflicts between Conflicts between partners that can not be partners that can not be worked outworked out

Typical PartnershipsTypical Partnerships

Small independent service or retail businesses. Small independent service or retail businesses.

bakeries, hair salons, flower shop, convenience bakeries, hair salons, flower shop, convenience store, landscaping or décor store, consignment store, landscaping or décor store, consignment shop, restaurants, retail stores,plumbers, shop, restaurants, retail stores,plumbers, electricians, mechanics, carpenterselectricians, mechanics, carpenters

Professional Designations or ApprenticeshipsProfessional Designations or Apprenticeships

accountants, lawyers, doctors, veterinarians, accountants, lawyers, doctors, veterinarians, mechanics, plumbers, electricians, carpentersmechanics, plumbers, electricians, carpenters

Co-operativesCo-operatives

Also called Co-opsAlso called Co-ops

Business owned and operated by a group of Business owned and operated by a group of people with a strong common interestpeople with a strong common interest

Start-up costs are shared among membersStart-up costs are shared among members

Members own and control and make all the Members own and control and make all the business decisionsbusiness decisions

Examples of CoopsExamples of Coops

FarmersFarmersBelong to producer co-opsBelong to producer co-opsMembers bring crops to a central location to sell themMembers bring crops to a central location to sell themCoop monitors the supply of the crop and controls its Coop monitors the supply of the crop and controls its sale and pricesale and priceFarmers do not compete against each other or undercut Farmers do not compete against each other or undercut other’s pricesother’s pricesFarmers can combine to buy equipment and reduce Farmers can combine to buy equipment and reduce costs and share expertisecosts and share expertiseExample: Saskatchewan Wheat Pool sells products all Example: Saskatchewan Wheat Pool sells products all over the world.over the world.

Consumer Co-opsConsumer Co-ops

Join together to operate a business that Join together to operate a business that provides them with goods and servicesprovides them with goods and services

Profits are divided among the members in Profits are divided among the members in proportion to the amount of business that proportion to the amount of business that each member doeseach member does

Examples: Omish Community Furniture Examples: Omish Community Furniture Co-ops Co-ops

Credit Unions/ Caisses Populaires Credit Unions/ Caisses Populaires

Financial co-opsFinancial co-ops

Like banks but profits are distributed annually to Like banks but profits are distributed annually to their memberstheir members

Co-operativesCo-operativesAdvantagesAdvantages Shared skills and Shared skills and

experiencesexperiences Less risk than for sole Less risk than for sole

proprietor and partnershipproprietor and partnership Liability is limited to the Liability is limited to the

amount of your share in the amount of your share in the capital of the coopcapital of the coop

Each member gets one vote Each member gets one vote – equal decision making and – equal decision making and influenceinfluence

If you have more shares, you If you have more shares, you still get one vote, but more still get one vote, but more share of the profitsshare of the profits

Coops get discounts due to Coops get discounts due to volume purchasing by many volume purchasing by many peoplepeople

Control sale and price of Control sale and price of goodsgoods

DisadvantagesDisadvantages Individual members hesitant Individual members hesitant

to invest more – only one to invest more – only one votevote

Decision-making can be Decision-making can be difficult because of multiple difficult because of multiple members members

Commitment of members Commitment of members may vary because some may vary because some have more money at stake have more money at stake and some may take things and some may take things more seriously than othersmore seriously than others