MAM1010

Discuss the following scenarios with a partner:1. Rachel and Terry would like to open up a

McDonald’s next month. Can they open up a McDonald’s without any problems?Why or why not?

2. JT and Rose are opening up their own coffee shop called “JR’s Coffee.”Can JT and Rose open up this coffee shop without any implications? Why or why not?

1. Sole Proprietorship2. Partnership3. Corporation4. Franchise5. Cooperative6. Conglomerate7. Multinational8. Crown

Corporations

A business owned and operated by one person.

Achieved by starting a new business or purchasing an existing business.

Examples?

Definition from Thomson Nelson, (2003). Small business management: an entrepreneurial emphasis. Retrieved February 8, 2005, from http://www.longeneckersmallbusiness2e.nelson.com/.

Advantages DisadvantagesQuick, easy, and inexpensive to establishOnly requires registration and appropriate licensesOwner makes all decisionsOwner includes all business profits/losses with personal income

Limited in terms of employees compensation plans All business income is taxable Profits may be taxed at a higher rate than for an incorporated organizationHarder to raise capital then for a partnership or a corporation

Information adapted from:Cranson, L & Dennis, M. (2001). Entrepreneurship: creating a venture. 2nd ed. Scarborough, ON: Nelson Thomson Learning.

Two or more people who own and operate a business.

Achieved by starting a new business or purchasing an existing business.

Examples?

Definition from Thomson Nelson, (2003). Small business management: an entrepreneurial emphasis. Retrieved February 8, 2005, from http://www.longeneckersmallbusiness2e.nelson.com/.

Advantages DisadvantagesQuick, easy, and inexpensive to establishEach partner may deduct business losses from whatever is earned within the businessFavorable tax treatment, especially for startup lossesCombines the talents and resources of two or more people

General partners assume unlimited liability for all debts/obligations incurred by the partnershipBoth business and personal income are taxed Profits may be taxed at a higher rate than for an incorporated organizationUnless stated, a partnership is automatically dissolved when a partner diesIf partners can’t agree on the day-to-day operation of the partnership, decisions may be difficult to make

Information adapted from:Cranson, L & Dennis, M. (2001). Entrepreneurship: creating a venture. 2nd ed. Scarborough, ON: Nelson Thomson Learning.

A business organization that exists as a legal entity and provides limited liability to its owners.

Corporations are traded on the stock market.

Achieved by getting incorporated (must be approved by Corporations Canada)

Examples?

Definition from Thomson Nelson, (2003). Small business management: an entrepreneurial emphasis. Retrieved February 8, 2005, from http://www.longeneckersmallbusiness2e.nelson.com/.

Advantages DisadvantagesCorporations have an unlimited life, so day-to-day business continues despite the illness or death of their ownersOwnership is easily transferredProfits can be removed from the corporation in the form of dividends, which can be a tax break for the ownerCorporation can arrange for employee benefits (health care, pension plans, etc)Personal liability of the owner is limited

More costly to set up because of government fees, name searcher, and legal feesRequires annual activities (annual reports and meetings)Business losses incurred during the startup period can be deducted only against future profits of the corporationOwner’s personal assets can be seized if they were put forth as collateral for the business loan

Information adapted from:Cranson, L & Dennis, M. (2001). Entrepreneurship: creating a venture. 2nd ed. Scarborough, ON: Nelson Thomson Learning.

Purchasing the rights and privileges to the name. If a person wants to open a franchise they must pay for the right to use the franchise name.

Achieved by purchasing the franchise name and rights.

Examples?

Definition from Thomson Nelson, (2003). Small business management: an entrepreneurial emphasis. Retrieved February 8, 2005, from http://www.longeneckersmallbusiness2e.nelson.com/.

Advantages Disadvantages

Formalized trainingFinancial assistanceProven marketing methodsManagerial assistanceQuicker start up timeOverall lower failure rates

Franchise feesRoyaltiesRestriction on growthLess independence on operationsFranchisor may be sole supplierTermination/renewal clauses

Information adapted from Thomson Nelson, (2003). Small business management: an entrepreneurial emphasis. Retrieved February 8, 2005, from http://www.longeneckersmallbusiness2e.nelson.com/.

It is an enterprise, or business, owned by an association of persons seeking to satisfy common needs (access to products or services, sale of their products or services, employment, etc).

Achieved by adhering to the cooperative definition.

A non-profit business used to serve customers who must be members

Examples?

Definition from Government of Alberta, (2005). The business link: business service centre. Retrieved February 8, 2005, from http://www.cbsc.org/alberta/tbl.cfm?fn=startup.

Advantages Disadvantagesowned and controlled by membersdemocratic control (i.e. one member, one vote); limited liability; profit distribution (surplus earnings) to members in proportion to use of service; surplus may be allocated in shares or cash.

possibility development of conflict between members; longer decision-making process; participation of members required for success; extensive record keeping necessaryless incentive to invest additional capital.

Information adapted from Government of Alberta, (2005). The business link: business service centre. Retrieved February 8, 2005, from http://www.cbsc.org/alberta/tbl.cfm?fn=startup.

A corporation consisting of several companies in different businesses. Such a structure allows for diversification of business risks, but the lack of focus can make managing the diverse businesses more difficult.

Multilevel marketing is required Examples?

Definition from ADVFRN, (2005). Advrn financial glossary: money words. Retrieved February 8, 2005, from http://www.advfn.com/money-words_term_1034_conglomerate.html.

Another path to growth for many corporations has been expansion abroad. Many have moved production closer to markets by establishing foreign subsidiaries. The German auto manufacturer Volkswagen, for example, built a plant in Pennsylvania. Chrysler Corporation bought Rootes Motors in the United Kingdom and Simca in France.

Multilevel marketing is required Examples?

Definition from Encyclopedia Britannica Inc, (2005). Encyclopedia britannica online. Retrieved February 8, 2005, from http://www.britannica.com/ebi/article?tocId=199226.

A corporation that is established by a country's government.

Government operated Examples?

Definition from WebFinance Inc., (2005). Investor words. Retrieved February 8, 2005, from http://www.investorwords.com/1227/crown_corporation.html.

Individually, use www.google.ca or any other search engine or site you may know of and find an example of EACH form of business ownership:

1. Sole Proprietorship2. Partnership3. Corporation4. Franchise5. Cooperative6. Conglomerate7. Multinational8. Crown Corporation

In a word document, give a brief overview of what the business is about (approximately two-three sentences) and explain how the example corresponds to the form of business ownership.

Make sure to reference the URL’s used. Save in your MAM 1010