business in canada (chapter 3)

- recognized as the very first legal form of business organization and represent the most basic of ownership forms.
- The sole proprietorship is the most popular organizational form in Canada and is the simplest and least expensive way to establish a business.
- The owner has complete control over the direction of the business.
- On the negative side, it may be difficult for one person to raise the funds necessary to start this form of business.
- The individual's skill set may also be limited and consequently constrain the strategic choices available to the sole proprietor.

advantages:
- limited liability
- ease of capital raising
- centralized management

disadvantages:
- double taxation
- limited flexibility
- complex legal structure

advantages:
- access to markets
- tax benefits
- equitable distribution of profits and losses

disadvantages:
- limited capital
- decision making challenges
- market competition

- A partnership is a non-incorporated business that is established by two or more people.
- The partners' financial resources are pooled and put into the business.
- While there are different types of partnerships, the most popular form is the general partnership.
- The general partnership shares many of the qualities that are characteristic of the sole proprietorship.
- Like the sole proprietorship, the general partnership represents an extension of the individual or, more precisely, an extension of two or more individuals who have chosen to combine their financial, managerial, and technical capabilities for this partnership.
- Downsides of general partnerships relate to tax and continuity of the business.
- Because partnerships are not recognized as legal entities, the members of a partnership are taxed as individuals.
- There are also limited partnerships or limited liability partnerships.
- Under this type of partnership, one (or more) owners will serve as general partners who manage the business and have the same unlimited liability as sole proprietors.
- However, the (limited) partners who do not participate in affairs of the business have limited liability.

- While this is often an apt description, a corporation is not necessarily characterized by size.
- The corporate form can apply to a large or to a small business.
- Regardless of their size or industry focus, all corporations share the same basic characteristics, the most significant of which is their existence as legal entities that are independent of the existence of their owners.
- The corporation is owned by shareholders or investors who purchase shares of stock.
- The shares of a public corporation are sold to individuals or companies who have the capital to purchase them.

Limited Liability:
- In a sole proprietorship and partnership, the owners are personally responsible for the debts of the business.
- That is not the case for owners of a corporation.
- For a corporation, owner liability is limited to the loss of the value of shares held.
- Consequently, sometimes a sole-person business is structured as a corporation in order to obtain liability protection (discussed below), where the risk of lawsuits can be costly.

Permanence:
- In contrast to a sole proprietorship or partnership, a corporation does not cease operations upon the death or departure of its shareholders, directors or officers.
- For example, when owners die, shares of the corporation can be transferred (via a will) to family members or other entities just like any other asset.
- Consequently, a corporation can continue indefinitely, assuming it remains profitable.

Transferability of Ownership :
- Selling ownership in a sole proprietorship or partnership is not simple.
- For those forms of business, each of its assets, licences, etc. must be individually transferred, and the sales process is much more complex.

Access to Capital:
- Consequently, when a corporation requires more capital for its business needs, it can raise capital in a variety of ways.
- The ease of raising capital stems from the fact that investors are often more attracted to investing in shares than other forms of ownership.
- The shares of publicly traded companies have a high degree of liquidity.
- Liquidity helps make corporate shares an appealing investment. which in turn increases the likelihood of investment in the company.

DIsadvantage of this: the cost that is associated with its startup

- To understand the novelty of the co-op, consider, again, the nature of the corporation.
- Now consider the very different case of the cooperative form of ownership.
- This consumer or food co-op would sell food to co-op members.
- Co-ops are based on the principle of participatory governance - that is, they are governed by those who use their services: the members of the co-op.
- Consequently, even if the intent of the co-op is to generate profit, that profit will be shared among the members. (ie. retail, credit union, housing)
- 'worker-owned coops'

disadvantage: government regulation, limited funds

1) they are open and voluntary associations
2) they have a democratic structure, with each member having one vote
3) they have an equitable and fair distribution of economic results based on the volume of operations made through them

Agency Problem:
- The growth in the power, authority, and control attained by the management group resulted in a number of serious flaws in corporate governance, referred to as agency problems.
- An agent is intended to represent the principal in a business activity.
- They are expected to act in the best interests of the principal without regard to the agent's self-interest.
- In this context, the management group was intended to serve as the agent for the owner/shareholder (the principal).
- The management group acts on behalf of the owner.

Purpose:
- It helps build trust with investors, the community, and public officials.
- Corporate governance can give investors and stakeholders a clear idea of a company's direction and business integrity.
- It promotes long-term financial viability, opportunity, and returns.

1. accountability
2. fairness
3. transparency
4. reliable leadership
5. stakeholder engagement

often referred to as the agency problem, is a significant issue in the governance of corporations. It arises due to a fundamental conflict of interest between the owners (shareholders or principals) and the managers (agents) of a company. The problem can lead to conflicts, inefficiencies, and a misalignment of interests within a corporation.

Shareholders: are the ultimate owners of the company. They invest capital in the company in exchange for ownership shares (equity). Their primary role is to provide capital to the company and expect a return on their investment.

Board of directors: is responsible for overseeing the company's management and ensuring that it acts in the best interests of shareholders. The board's fiduciary duty is to represent shareholders.

Corporate Officers: including the CEO and other top executives, is responsible for day-to-day operations and implementing the company's strategy.

Employees: are important stakeholders with vested interests in the company's success and financial stability

adds a normative or evaluative attribute to the process of governing. From a human rights perspective, it refers primarily to the process whereby public institutions conduct public affairs, manage public resources and guarantee the realisation of human rights.