Definition: An organization that produces or sells

goods or services to satisfy the needs, wants, and demands of consumers for the purpose of making a profit.

Franchise

There Are Several Different Business Structures

There Are Many Factors To Consider

Selection Of A Business Structure Should Be Based Upon Adequate Information

The Decision Should Be Made After Weighing All Considerations

Choosing the Best Business Ownership

Franchise

1. How easy is it to set up, manage, operate and liquidate?

2. Taxation - What are the tax advantages and disadvantages?

3. Asset Protection - What are your potential legal liabilities?

4. Fringe Benefits - What can the company provide & deduct?

5. Estate Planning - What happens to the business at ones death?

Choosing the Best Business Ownership

Issues/Questions to Ask:

Choosing the Best Business Ownership

Sole Proprietorship -> is a business owned and operated by one person for profit

1. Simple and inexpensive to create and operate.2. Owner reports profit or loss on his or her personal tax return.3. Easy to liquidate.

1. Owner personally liable for business debts.2. Business ends with death of owner.

Main Advantages

Main Drawbacks

Type of Entity

-> Easiest Form of Business to Set Up and Operate

1. No formal process.

2. Obtain all necessary federal, provincial and local licenses and permits.

3. Register Assumed Name Certificate (if necessary).

4. Obtain Employer Identification Number (if necessary).

Assumed Name Certificate

General rule - if the business (e.g., sole proprietorship

& general partnership) is conducted under an

assumed name (a name other than the surname of the

individual (s)), an assumed name certificate should be

filed or registers in the region that the business plans

to operate.

Example: Sole Proprietor

• Hair Salon

• Auto Repair Shop

• Barber Shop

• Corner Variety

Store

• Doctor

• Contractor

• Book keeper

• Dog walker

• Artist

• Actor

• Fisherman

• Taxi Driver

-> has at least one general partner and one or more partners who have limited liability who are not involved in management anddecision-making

1. Limited partners have limited personal liability for business debts as long as they don't participate in management.

2. General partners can raise cash without involving outside investors in management of business.

Type of Entity

Main Advantages

Main Drawbacks1. General partners personally liable for business debts.2. More expensive to create than general partnership.3. Suitable mainly for companies that invest in real estate.

1. Cross between a partnership and a corporation, with mostly partnership characteristics.

2. Tax advantages of a partnership.3. Limited liability of a corporation.

1. Owners have limited personal liability for business debts even if they participate in management.

2. Profit or loss can be allocated differently than ownership interests.3. Moderately easy to liquidate.

Main Advantages

Main Drawbacks1. More expensive to create than partnership or sole proprietorship.2. May or may not terminate upon death or withdrawal of member.3. Cannot have more than two of the four characteristics of a

corporation.

Type of Entity

-> two or more individuals who contribute money, labor, and skill to a business, and who share in its profits, losses, and management.

1. Simple and inexpensive to create and operate.2. Owners (partners) report their share of profit or loss on their

personal tax Returns. 3. Easy to liquidate.

1. Owners (partners) personally liable for business debts.2. Terminates upon death or withdrawal of partner, unless there is

a partnership agreement to the contrary.

Type of Entity

Main Advantages

Main Drawbacks

Example: Partnership

• Accounting Firm

• Law Firm

1. Formed under Federal or Provincial laws.2. Legally it is treated as an artificial person, distinct from the

individuals who own it.

1. The most complex form of business to set up and operate.2. Monitored by federal, provincial and local agencies.3. Profits may be subject to double taxation.4. Limited legal liability.5. Business continues after death of owner/transferability of shares.6. Difficult and expensive to liquidate

Attributes

Main Drawbacks

1. More expensive to create than partnership or sole proprietorship.2. Paperwork can seem burdensome to some owners.3. Separate taxable entity.

Type of Entity

Example: Corporation

• General Motors

• Ford Motor

Company

• Bell Canada Inc.

• Rogers Cable Inc.

• Dofasco Inc.

• Stelco Inc.

• Home Depot Inc.

• Rona Inc.

• Petro Canada Inc.

• Royal Dutch Shell Inc.

• Cineplex Odeon Inc.

• Coca Cola Inc.

1. Owned by its members.2. All members get one vote.3. Members elect a board of directors.

1. Lower costs of goods or services.2. Set up is easy and inexpensive.

Main Advantages

Main Drawbacks

1. Members diverse needs or wants can lead to difficulty in the decision making process.

Type of Entity

Example: Cooperatives

• Mountain Equipment Co-op

• The Co-Operators Group Inc.

• Arctic Co-operatives Ltd.

• Calgary Co-op.

• CoopeTarrazú

1. One business licenses another to use its name, operating procedure and so on.

2. As a hybrid, can have any form of ownership.

1. Association with a well established brand, reputation and product or service.

2. Assistance with site selection, lease negotiation, site development, builders and shop fitters.

Main Advantages

Main Drawbacks

1. Less autonomy in some business decisions.2. Restricted territory in which you may operate and or promote

your product

Type of Entity

Franchise

Example: Franchises

• Pizza Hut

• Arby’s.

• Derry Queen.

• Subway.

• KFC.

• Tim Hortons.