3.1 Introduction to Forms of Business Ownership Flashcards
What are the three main forms of business ownership in Quebec?
Sole Proprietorship, Partnership, and Corporation.
What is a business?
A business is an enterprise that carries on an organized economic activity for profit.
Why is it important to read court cases in business law?
Court cases help understand how judges apply the law to real-world situations by analyzing parties, legal issues, positions, and judgments.
What is a sole proprietorship?
It is the simplest form of business, owned and operated by one person, who is personally liable for all business debts.
Does a sole proprietorship require registration?
Yes, it must be registered in the province where it operates through an online form.
What are the advantages of a sole proprietorship?
Easy and inexpensive to set up
Full control by the owner
Simplified tax filing
What are the disadvantages of a sole proprietorship?
Unlimited personal liability for business debts
Business ends upon the owner’s death or decision to stop operating
Difficult to raise capital
What is a partnership?
A partnership is a contract between two or more people who agree to operate a business together, contributing assets, skills, or labor, and sharing profits.
What are the two main types of partnerships?
General Partnership and Limited Partnership.
What is a general partnership?
A business arrangement where two or more individuals share profits, responsibilities, and liabilities.
What legal agreement governs a general partnership?
A partnership agreement, outlining roles, contributions, profit-sharing, and procedures for buying/selling interests.
What is “solidary liability” in a general partnership?
Each partner is personally liable for 100% of the business debts. Creditors can collect the full amount from any one partner, though that partner can seek reimbursement from others.
How does partnership registration work?
Partnerships must register in their province, similar to sole proprietorships.
What is a limited partnership?
A partnership where at least one partner (general partner) has unlimited liability, while other partners (special partners) have limited liability and act as investors.
Why are partnerships less common for businesses?
Due to personal liability risks and the fact that corporations offer better tax advantages and legal protections.
Partnerships are usually used where required by law or for tax benefits.
What is a corporation?
A corporation is a legal person distinct from its owners, capable of owning property, entering contracts, and conducting business through directors and officers.
How do corporations make decisions?
Through directors, officers, and senior employees who act as representatives.
What is the difference between federal and provincial incorporation?
Federal incorporation (under CBCA) allows a company to operate across Canada with name protection.
Provincial incorporation allows a business to operate in a specific province but may need extra registrations for other provinces.
What must be considered when choosing a corporate name?
It must be unique and not conflict with existing businesses.
Federal companies must check the federal trademark and incorporation databases.
A name can be a numbered company (e.g., 123456 Canada Inc.) if branding isn’t a concern.
Why do corporations file annual registrations?
To update public records, including company name, legal address, and directors.
