Forming Your Business

Sole proprietorship
Partnerships
The Business Plan
 Introduction
Canada is free market economy

Generally:
Entrepreneurs need NO
permission
No fees, no special forms

To start new business, just.... begin

3 Main Forms of Organisation

In Canada 3 common forms

1. Sole Proprietorship
2. Partnership
3. Corporation
 Sole Proprietorship

Easiest way to form a business

Most common form of ownership

Some of you are sole proprietors

Examples…
 Sole Proprietorship
Business owned / operated by 1 person

Sole proprietor:
makes all decisions
keeps all profits
responsible for all debts
Sole Proprietorship - Advantages
Easy to set up:
No regulatory requirements
No mandatory accounting needs
Cheap to set up:
$60 - $70 if registered / $0 if not
Does not need to be registered
Management / ownership clear
Sole Proprietorship - Disadvantages

Limits to owner’s skills

Limits to owner’s resources
Hard to get finance (bank loans)
Personal liability
Unlimited liability
 “Personal” Liability

Because and your business are one

and the same:

You are personally responsible

to pay any bills, settle any law-
suits, and pick up all the pieces…

If things go wrong!
 “Unlimited” Liability

Your “personal” responsibility is unlimited.

Your financial responsibility:

Not limited to value of the job.
Not limited to value of assets used on job
If things go wrong, you can be sued for $$$
You could lose your house, car, life savings
 Partnership

A Business owned / operated by

2 or more people acting together

Examples…
 Partnership - Advantages
Two (or 3) heads better than one

More resources
(human and financial)
More credibility
(more than 1owner)
More contacts
(potential customers)
 Partnership - Disadvantages
Conflict (more than 1owner)

Personal liability
Unlimited liability
Joint and several liability
each partner responsible for debts of
partnership, even when incurred by
another partner.
 Partnership Agreements
Agreement between partners
Normally includes:
how much $$ each
partner contributed
what each partner must do
how the partners paid
how profits distributed

Between partners only. Not binding on others

 General Partnership
Simplest form of Partnership
All partners share in ownership
All partners share in management
All partners: unlimited liability for debts
All partners: personal liability for debts
 
 Limited Partnership
Partnership with: Partners who take no
part in management of business

Limited Partners supply $$$ only

Limited Partners have limited liability

(Can lose only their investment)

 The Business Plan

Why Write One?

•Focus your efforts
•Attract partners
•Convince Investors
•Plan of Record
 Elements of a Business Plan

The Business Model

•What are you selling?

•Who are you selling it to?
(a broad description of the
target market)
•How are you performing the
sale & getting paid?
 Elements of a Business Plan
Detailed Product/Service
Description
Physical description (2
marks)
How is it consumed? (2
marks)
Value Proposition (what
value does it provide) (4
marks)
Improvement on the
Competition (if any
Market Analysis: What do you think you know about:

•The Overall market

•The Specific market

•Competitive factors
 Financial Plan

Startup Capital Cash Management

•Develop the product •Cash keeps the business
alive
•Market the concept •Revenues happen slower
than expenses
•Negotiating deals with
•Build the business
suppliers and customers
•Cash forecasting
•Expect the worst