© 2012 McGrawHill Ryerson Ltd. Chapter 1 -

A legal entity that allows the owners to have limited liability.

Shareholders are owners, but the corporations are run by employees led by the CEO.

Although the separation of ownership and control adds flexibility to the operation, gives permanence to the corporation, it also creates the agency problems.

Corporations are the dominant form of business in the modern day. More than 88% of business transactions are done by corporations.

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© 2012 McGrawHill Ryerson Ltd. Chapter 1 -

A Corporation can sue or be sued.

Shareholders can sell shares.

Have Boards of Directors.

Can be costly, in time and money.

Must abide by the rules of stock exchanges and accounting standards and securities laws.

Taxed twice – on the company profits and also in the hands of shareholders.

Must share information with the public.

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© 2012 McGrawHill Ryerson Ltd. Chapter 1 -

Sole Proprietorship Partnership (General and Limited) Hybrid forms (LLP, LLC, PC, etc.)

Sole proprietorship is the primary form of business that is easy to form and dissolve.

Partnerships are dominant forms for specialized business like medical clinics and law firms.

Hybrid forms have characteristics of corporations, and partnerships.

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© 2012 McGrawHill Ryerson Ltd. Chapter 1 -

AttributesSole

Partnership CorporationProprietorship

Who ownsThe manager Partners Shareholders

the business

Are Managers &No No Usually, yes

owners separate?

What is theUnlimited

General - unlimitedLimited

owners' liability Limited - limited

Owners and businessNo No Yes

taxed separately?

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