Business Organization
And Finance
Chapter 5
Sole Proprietorship
• One person owns and operates the business.
• The most common form found in Canada, especially in
services such as restaurants, retail, and repair.
Advantages
- you’re the boss
- you make all the decisions
- you get all the profit
- personal satisfaction
- easy to get started.
Disadvantages
- size is limited
- you supply financing
- you do all the work
- unlimited liability
- May not have necessary skills
- If you get sick…..
surprising stats about small business in Canada - Business - CBC
News
Partnership
• Two or more individuals as owners
• Share profits and losses.
• “Articles of Co-partnership”
– A formal agreement signed specifying the amount of
capital to be provided and the authority of each
partner.
• Silent partner
– Invests in the business, receives a share of the profits
but has no say in the running of the business.
Advantages and Disadvantages
•
•
•
•
•
Easier to raise capital
Larger scale
Share the work load
Share decisions
Each partner has a
certain expertise, which
may compliment each
other.
• Partners may disagree
• Unlimited liability
• If a partner leaves or dies
the business is dissolved.
Could be complicated
involving heirs and
estates so lawyers
probably would be
involved.
• CBC Digital Archives Tim Hortons: Coffee,
Crullers and Canadiana Tim Hortons: 'Ron Joyce
has a story to tell'
Public Corporations
•
•
Need capital? GO PUBLIC. SELL SHARES IN YOUR COMPANY ON THE STOCK MKT.
Exist on their own separate from the former owners (now owned by the shareholders).
A CORPORATION IS LEGALLY THE SAME AS A PERSON.
A legal personality with the same rights as a person.
•
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THE CORPORATION [3/23] A Legal "Person" - YouTube
THE CORPORATION [6/23] The Pathology of Commerce – YouTube
•
FIRESTONE CORPORATION GETTING CAUGHT IN LIBERIA CIVIL WAR: NEO COLONIALISM MNC’s IN
POST COLONIAL AFRICA
•
http://video.pbs.org/video/2365371458/
•
Owners are called shareholders. They elect a Board of Directors (CEO, CFO, CAO, TREASURER, ETC) at
the annual AGM (ANNUAL GENERAL MEETING)
•
The former owners before it “went public” have limited liability…if the corporation fails, owners are only
responsible for the amount they have invested.
•
A corporation raises money (capital) by offering securities (shares, bonds) for sale at an IPO (INITIAL PUBLIC
OFFERING) and they continue thereafter. There are three main types…
Mark Zuckerberg Rings Nasdaq Opening Bell – YouTube
•
• https://www.youtube.com/watch?v=kjZDbVc_iLw
• Registry of Joint Stock Companies |
Access Nova Scotia | Government of NS
Types of Securities: Common
Shares
Common Shareholders…
• Become part owner of the corporation.
• Get one vote per share at the yearly AGM
• Shares bought and sold on the stock market.
• Make money if…
– the corporation makes money and decides to
distribute profits to the shareholders in the form of a
dividend. Sometimes profits go back into the corp. as
Capital.
– Shareholders sell their shares for more than the
purchase price.-PROFIT
Preferred shares
Preferred Shareholders…
• Own stock that has preference over the common
share in the payment of dividends.
• First to be paid if the corporation goes bankrupt.
• Do not have a vote at the AGM.
• More security as an investment than common
shares.
Stock Exchange – an organized market
where listed stocks are bought and sold.
Measured by various Indexes :
TSX, NASDAQ, NYSE, DOW JONES, FTSE, NIKKEI
• Stock broker – acts as an agent
between the TRADER on the floor of the
exchange and any customers interested
in trading shares.
• Trader – licensed to buy or sell shares
on the stock market floor. The trader fills
the clients order. (see pgs. 90-91)
Bonds
• A written promise to pay a stated sum of
money at sometime in the future, including
interest.
• You are not an owner of the corporation,
but a creditor (they borrowed your money).
• Must be paid first if the corporation fails.
• Governments also issue bonds (Canada
Savings Bonds, War Bonds)
Corporate Control
• The shareholders of a corporation
ultimately control it.
• With one vote per share, they elect a
board of directors at the AGM, (Annual
General Meeting).
• Voters may arrange to vote by Proxy,
transferring their right to vote to someone
else.
The Board of Directors…..
•
•
•
•
Appoint the company executives
Decide what is going to be produced
Set policy
Decide how profits will be distributed
•
•
•
SOBEYS Board of Directors
Apple (Canada) - Apple Press Info - Apple Leadership
DreamWorks Animation SKG, Inc. - Investors Relations - Coporate Governance - Board
of Directors
Board of Directors | The Walt Disney Company
http://news.microsoft.com/microsoft-board-of-directors/
Leadership Team - Irving Oil
Extreme Group
Corporate Governance | Clearwater Seafoods
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•
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Profits can be divided by….
• Distributed to shareholders in the form of a
dividend. (amount of profit divided by the
number of shares equals the dividend per
share)
• Reinvesting in the corporation-Capital
• Paying off debt.
• Saving for the future.
• Bonuses to the executive.
Advantages of a Corporation
•
•
•
•
Limited liability
Wide range of securities
Raise large amounts of capital
Lasts a long time
Disadvantages of a Corporation
•
•
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•
Control in the hands of the few
Lack of motivation for management
Expensive to establish
Taxed twice
• Stock Exchange – an organized market
where listed stocks are bought and sold.
Co-ops
A cooperative is…
• A business run for the benefit of its members, motivated
by the desire to save money, not make a profit.
• It issues shares to the public but each member only gets
one vote, no matter how many shares they own.
• Savings in a co-op are based on a Patronage refund.
Profits are distributed to the members based on the
amount of business or patronage given to the co-op
during the year.
Three Main Types Of Co-ops
1. Consumer co-ops – providing savings to members on
consumer goods.
– groceries, bulk items, gas
– Mountain Equipment Co-op – MEC – Shop climbing, cycling,
running, yoga and more
2. Producer co-ops – help producers save money.
– Farmers set up co-ops to purchase fertilizer, seed, insurance
and machinery.
– Canadian Wheat Board - Wikipedia, the free encyclopedia
3. Credit Unions – members make deposits, which in
turned are loaned to other members.
– Same services as banks.
– Decisions are made by the board of directors.
Advantages and Disadvantages
of Co-ops
• Patronage refund
• Each member has equal say
• Difficulty competing in the private sector.
• Less aggressive in the marketplace.
• Welcome to Co-op Atlantic | Bienvenue à Coop
Atlantique
• Credit Union Atlantic - Home
• Moses Coady - Wikipedia, the free encyclopedia
Public Enterprise/Crown
Corporation
• A business run by the government to provide
goods and services to the public.
• Often compete with the private sector which is
seen as an unfair advantage.
• However limited by…
– government cuts and privatization (selling
government assets to the private sector) have evened
the playing field.
– public’s demand for balanced budgets and a
reduction in deficits.
Two Types of Public Enterprise
• Crown Corporation
– owned by the government but expected to run independently.
– Ensures competition in the marketplace so that Canadians can
afford services deemed essential. (H^LIF^X Transit, CBC,
Petrocanada and Air Canada in the 1970s, Postal Service)
– Petro-Canada - Wikipedia, the free encyclopedia
– Petro Canada Canada First (80's) – YouTube
– Trudeau ventures into Liberal desert - Politics - CBC Player
– PIERRE-ELLIOTT-TRUDEAU-RIPS-OFF-CANADA
• Public Utility
– a legal monopoly allowed by government to operate an essential
service, such as electricity.
– Utilities are controlled by the public utilities board or NSURB
which has to approve any raise in basic service fees. (Halifax
Water)
Stock Market History in modern era
• stockmkt.ppt
• ..\history11\GreatDepressionbest.ppt