Forms of Business
Ownership
Sole Proprietorships
Partnerships
Cooperatives
Franchises
Corporations
Forms of Business Ownership
1. Sole Proprietorship
Owned by one person
2. Partnership
Owned by two or more partners
3. Cooperative
Owned by its workers or by members who use the business
4. Franchise
A business (or franchisee) licenses another to use its name, operating
procedure, suppliers, etc.
May have any form of ownership
5. Corporation
Is an artificial “person” or entity created by law and owned by
shareholders
Sole Proprietorship

Simplest form of business ownership

Business has one owner
Sole Proprietorship
(over 1 million in Canada)
Advantages
Disadvantages
 Keep all the profits
 Unlimited Liability
 Make all the decisions
 Facing personal and financial risks
as well as challenges on your own
 You are your own boss
 Financial information can be kept
secret. from competitors, but not
the government
 Borrowing money may be more
difficult
 Huge time commitment
Sole Proprietors
Examples may include individuals who are:
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Artists
Authors
Carpenters
Computer specialists
Digital designers
Ecotourism guides
Farmers
Industrial designers
Photographers
Web designers
Chefs or Bakers
Hair stylists
Partnership

More complex (needs a written agreement)

Partners must discuss and agree on issues such
as:
how much time and money each partner will put
into the business
 How the profits will be shared
 Who will make decisions about different aspects of
the business
 Who will manage the employees
 How the partnership might be ended

Partnerships
Advantages
Disadvantages
Inexpensive to set up and
Unlimited liability
Two people to invest and it
Your personal assets
organize ($1000)
is easier to borrow from a
bank
More brains filled with
different knowledge,
experience, skills
Shared responsibility eases
stress and workload
Share debt and can more
easily take a vacation
(home, care etc may need
to be used to pay off
business debts)
Conflicts between partners
that can not be worked out
Typical Partnerships
Small independent service or retail businesses.
 bakeries, hair salons, flower shop,
convenience store, landscaping or décor
store, consignment shop, restaurants, retail
stores, plumbers, electricians, mechanics,
carpenters
Professional Designations or Apprenticeships
 accountants, lawyers, doctors, veterinarians,
mechanics, plumbers, electricians,
carpenters
Co-operatives

Also called Co-ops

Business owned and operated by a group of
people with a strong common interest

Start-up costs are shared among members

Members own and control and make all the
business decisions
Examples of Co-ops
Farmers
 Belong to producer co-ops
 Members bring crops to a central location to sell
them
 Co-op monitors the supply of the crop and
controls its sale and price
 Farmers do not compete against each other or
undercut other’s prices
 Farmers can combine to buy equipment and
reduce costs and share expertise
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Example: Saskatchewan Wheat Pool sells
products all over the world.
Consumer Co-ops

Join together to operate a business that provides them with goods and
services

Profits are divided among the members in proportion to the amount that
the member buys.

Examples: Amish Community Furniture
Co-ops
Credit Unions/ Caisses Populaires

Financial co-ops

Like banks but profits are distributed annually
to their members
Co-operatives
Advantages
Disadvantages
 Shared skills and experiences
 Individual members may
hesitant to invest more – only
one vote
 Less risk than a sole proprietor
or partnership
 Liability is limited to the
amount of your share in the
capital of the co-op
 Each member gets one vote –
equal decision making and
influence
 If you have more shares, you
still get one vote, but more
share of the profits
 Co-ops benefit through volume
purchasing
 Shareholders control what is
sold and the price of goods
 Decision-making can be difficult
because of multiple members
 Commitment of members may
vary because some have more
money at stake and some may
take things more seriously than
others
Corporation
Legal
entity that exists independently of
its owners who are the shareholders.
Has
the same rights and obligations
under Canadian law as a person and
therefore can be found guilty of
committing crimes.
Corporation
Advantages
Disadvantages
 Owners are only liable for the
amount they invest – Limited
liability
 More complicated and
expensive to set up
 More financial resources to
expand and grow (money
collected from the selling of
shares) is available
 Easier to get a loan from a bank
because it has more assets to
use as security (collateral)
 The tax rate is lower than for a
sole proprietorship.
 Ownership is easily transferable
 Must be registered in every
province it operates
 Closing a corporation can be
time consuming and expensive
 The people that are managing
are NOT the shareholders
 Must publish an annual report
outlining the companies
financial position
 Changes in stock market could
impact future financial
resources raised through issuing
new stock to sell to the public
Corporation
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Brought into existence by drawing up and filing with the
proper government agency a document called the
articles of incorporation
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A lawyer and accountant are often needed to prepare
this document
Corporation
Articles of Incorporation include information such as:
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Name of corporation
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Headquarters of corporation
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Type of corporation
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Number of shares allowed to be issued to the public for
purchase
Classification of Corporations
1. Non-Profit Corporation
2. Crown Corporation
3. Private Corporation
4. Public Corporation
What type of Corporation?
Non-Profit Corporations
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Purpose is to undertake fundraising, to do research and
to lobby for a particular cause in order to help people
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Example: United Way, Museums, Religious organizations,
athletic and artistic organizations.
Crown Corporation

Owned by the federal, provincial, or municipal
governments

Function is to provide a special service to the public

Examples: Bank of Canada, Royal Canadian Mint,
Canada Post, Canadian Broadcasting Corp. (CBC)
Private Corporation

Can have up to 50 shareholders

A single person who incorporates may have only
one shareholder – him or herself.

Usually small but not always
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Roots is a private corporation
Public Corporation

Does not have a restriction on the number
of shareholders. (unlimited number)
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Shares are bought and sold (traded) on
the stock exchanges, such as the Toronto
Stock Exchange, the Vancouver Stock
Exchange.
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Examples include: Tim Hortons, Google,
Apple, Hudson Bay Co.
Owners/Shareholders
(Elect Board of Directors)
Board of Directors
(hire officers)
STRUCTURE OF A
CORPORATION
Officers
e.g. CEO
(Chief Executive Officer)
sets corporate
objectives and hires managers
Managers
(Supervise Employees)
Employees
Structure of a Corporation

The shareholders elect a board of
directors, who direct the overall affairs of
the corporation

The BOD hire the officers (i.e. the
President of the corporation) who decide
on the objectives for the company and
hire the managers and essentially run the
day to day operations of the business.
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The managers supervise the employees.