Sole Proprietor: Moe Sizlak

Moe has a small bar in Springfield. As the only owner, he is a SOLE PROPRIETOR Other than
acquiring a business and liquor license, his business was very easy to set up.

His biggest problem is his ability to raise CAPITAL Since he has no

partners or shareholders, it is difficult for him to raise the money
required to improve or expand his establishment. Moe could
borrow money from the bank, but the problem with that is he
would have to pay INTEREST.

Moe is also aware that if he builds up debts, he could suffer from

UNLIMITED LIABILITY. This means that his personal possession
(such as house, car, savings) could be used to pay his DEBT. Also,
if Barney or Homer sue Moe for any type of negligence, Moe
remains fully accountable.

It can sometimes be difficult for Moe to run his business. He must

make ALL decisions regarding finance, marketing, operations, etc.
He sometimes wonders if having a business-minded partner
would allow him to focus more and his expertise; bartending. If he is sick, the business could be
in jeopardy. If he died, the business might fold.

Moe enjoys the ability to make his own decisions, set his own hours, and not have to answer to
any higher boss. As the only owner, Moe also enjoys the right to keep ALL profits.

Sole Proprietorship Advantages Sole Proprietorship Disadvantages

IN HIS OWN BUSINESS MAY LOSE REVENUES IF SICK OR TAKE

HOLIDAY

CAN CHOOSE HIS OWN WORKING HOURS UNLIMITED LIABILITY

RECEIVE ALL HIS PROFITS FULL RESPONSBILITY FOR BUSINESS

EASY TO SETUP LACK OF CAPITAL FOR GROWTH

 Unlimited Liability
In the case of any sole proprietorship, the law sees no difference between the OWNER and the
BUSINESS. Mario started a plumbing company called “Super Flush”. All of his personal assets
and business assets are considered the same. If the business has
any debts (perhaps to pay his employees, pay his suppliers, pay
insurance, etc), they are completely Mario’s responsibility even if
“Super Flush” runs out of money. This is called LIMITED
LIABILITY. It is the biggest disadvantage the sole proprietorship
form of ownership. For this reason, sole proprietorships are
generally started when a business is SMALL or the level of risk is
LOW.

Partnerships
Mario feels like he needs to expand his business. The pressure of
owning and operating “Super Flush” on his own was getting high. He
also just had a child and feels like getting a partner to partially own
his business is a good idea. His brother Luigi decided to invest $20
000 and buy 20% of the value of Super Flush. Once Mario and Luigi
agree to start the partnership, they must sign a PARTNERSHIP DEED.
Luigi’s investment allowed them to buy new DO ASSETS and do more PRODUCTION. Luigi, now
as an owner, can also be trusted to be a very hard worker/manager because he makes more
money when Super Flush does well.

A business can start as a partnership, or become one later on. With 2 or more people as
owners, they can bring in more skills, contacts, money, information and expertise than a sole
proprietor.
Mario no longer keeps all of the business’s PROFITS. Fortunately, if the business loses money,
he does not have to absorb all of the loses. However, unlimited liability still exists.

In a UNLIMITED liability partnership, only 1 of the owners must have unlimited liability and the
others can have limited liability (meaning their personal assets are NOT at risk).

Sometimes, decision making can be difficult if the

partners have a different vision for the business.

Remember – a sole proprietorship can have many

employees. The ‘sole’ simply refers to the owner.

Partnerships can also have many employees who are

not owners of the business.

Partnership Advantages Partnership Disadvantages

FINANCIAL STENGTH POTENTIAL LIABILITIES

SPECIALISATION AND DIVISION OF LABOUR A LOSS OF AUTONOMY

EASY ACCESS TO CAPITAL EMOTIONAL ISSUES

EASY FORMATION A LACK OF STABILITY

SHARED RESPONSIBILITY HIGHER TAXES

COST SAVING FUTURE SELLING COMPLECATIONS

 Corporations

Public and private corporations are must safer investments because of LIMITED LIABILITY. This
means, investors only risk the amount of money invested in the business. Their personal assets
are completely safe.

Ex. If you buy $1000 of stocks for Ford Motor Co. and they lose $100 trillion dollars, the most you can
lose is the $1000 you invested. Your savings, house, etc cannot be seized by the creditors of Frod.

Because of limited liability, corporations will be able to sell many shares (stocks) to . Hence,
corporations can raise huge amounts of CAPITAL.

A major disadvantage of corporations is that they have a COMPLEX and COSTLY process
of setting up. They are also closely REGULATED by the government and are subject to
corporate TAXATION.

Unlike sole proprietorships and partnerships, a corporations is a

separate entity, which means they are legally a person separate
from its investors. If someone sues the corporation, they are
NOT suing the individual investors.
As a separate ‘person’, a corporation can own its own property,
enter into contracts, and conduct legal business in its own name.
Shareholders CANNOT be held responsible for the actions of the
corporation.

Similarly, a corporation is not affected by the actions of its investors. If someone who owns lots
of stock dies, it should not affect the day to day operations of the company. The shares would
be transferred to the legal heir of the deceased.

Corporations have an ANNUAL GENERAL MEETING (AGM) where they share all information
about the company’s progress, profits, goals, etc to its shareholders. This is also when
shareholders have an opportunity to vote on crucial issues and for members of the BOARD OF
DIRECTORS. (BOD) The BOD manages the affairs of the business and often consist of a CEO,
CFO, COO, chairman, etc. These directors are the ‘big
Stocks can make money by:
shots’ of the corporation. Stock price going up
Dividends paid to shareholders
What about the profits? Some are re-invested in the
In corporations, 1 share = 1 vote
business (retained earnings) and some are paid out to the
shareholders (dividends)

4 Types of Corporations

1. PRIVATE _ Corporation: Maximum of 50 shareholders.

Can keep financial info private
Ex. On The Green

2. PUBLIC Corporation: Unlimited shareholders

Shares sold on stock market (TSX, NYSE, Nikkei, NASDAQ, etc)
Financial statements made public
Ex. Bombardier, Kodak, Sears, TD Bank

3. NGO Corporation: Main goal is to benefit a cause or society

Ex. Tecumseh Minor Hockey, Make a Wish Foundation

4. CORPORATE_Corporation: Owned by the government

Ex. CBC, OLGC,Nat’l Gallery of Canada, VIA Rail, Royal Can. Mint

Corporation Advantages Corporation Disadvantages

ABILITY TO RISE FUNDS DOUBLE TAXATION

EASY OWNERSHIP TRANFER EXDPENSIVE TO FORM

NO LIFE LIMITS DISTINCT LEGAL ENTITY

START-UPS COSTS HIGHER

CLEAR STRUCTURE

Cooperatives
A cooperative is an organization owned by its members. They attempt to maximize the profits
of the industry by setting high prices and sharing purchasing power. It is common in the
agriculture industry (Saskatchewan Wheat Pool farmers do not have to undercut each other).
All excess profits are shared by the members.