Business Organization Business Organization And FinanceAnd Finance

Chapter 5Chapter 5

Sole ProprietorshipSole Proprietorship

• One person owns and operates the business. • The most common form found in Canada, especially in

services such as restaurants, retail, and repair.

Advantages Disadvantages

- you’re the boss - size is limited- you make all the decisions - you supply financing- you get all the profit - you do all the work- personal satisfaction - unlimited liability- easy to get started. - May not have necessary

skills - If you get sick…..surprising stats about small business in Canada - Business - CBC News

PartnershipPartnership

• Two or more individuals as owners• Share profits and losses. • “Articles of Co-partnership”

– A formal agreement signed specifying the amount of capital to be provided and the authority of each partner.

• Silent partner– Invests in the business, receives a share of the profits

but has no say in the running of the business.

AdvantagesAdvantages and and DisadvantagesDisadvantages

• Easier to raise capital• Larger scale• Share the work load• Share decisions• Each partner has a

certain expertise, which may compliment each other.

• Partners may disagree• Unlimited liability• If a partner leaves or dies

the business is dissolved. Could be complicated involving heirs and estates so lawyers probably would be involved.

• CBC Digital Archives - Tim Hortons: Coffee, Crullers and Canadiana - Tim Hortons: 'Ron Joyce has a story to tell'

Public CorporationsPublic Corporations• Need capital? GO PUBLIC. SELL SHARES IN YOUR COMPANY ON THE STOCK MKT.• Exist on their own separate from the former owners (now owned by the shareholders).

A CORPORATION IS LEGALLY THE SAME AS A PERSON.A legal personality with the same rights as a person.

• THE CORPORATION [3/23] A Legal "Person" - YouTube• THE CORPORATION [6/23] The Pathology of Commerce – YouTube

• FIRESTONE CORPORATION GETTING CAUGHT IN LIBERIA CIVIL WAR: NEO COLONIALISM MNC’s IN POST COLONIAL AFRICA

• http://video.pbs.org/video/2365371458/

• Owners are called shareholders. They elect a Board of Directors (CEO, CFO, CAO, TREASURER, ETC) at the annual AGM (ANNUAL GENERAL MEETING)

• The former owners before it “went public” have limited liability…if the corporation fails, owners are only responsible for the amount they have invested.

• A corporation raises money (capital) by offering securities (shares, bonds) for sale at an IPO (INITIAL PUBLIC OFFERING) and they continue thereafter. There are three main types…

• Mark Zuckerberg Rings Nasdaq Opening Bell – YouTube

• https://www.youtube.com/watch?v=kjZDbVc_iLw

• Registry of Joint Stock Companies | Access Nova Scotia | Government of NS

Types of Securities: Common Types of Securities: Common SharesShares

Common Shareholders…• Become part owner of the corporation.• Get one vote per share at the yearly AGM• Shares bought and sold on the stock market.• Make money if…

– the corporation makes money and decides to distribute profits to the shareholders in the form of a dividend. Sometimes profits go back into the corp. as dividend. Sometimes profits go back into the corp. as Capital.Capital.

– Shareholders sell their shares for more than the sell their shares for more than the purchase price.-PROFITpurchase price.-PROFIT

Preferred sharesPreferred shares

Preferred Shareholders…• Own stock that has preference over the common

share in the payment of dividends.• First to be paid if the corporation goes bankrupt.• Do not have a vote at the AGM.

• More security as an investment than common shares.

Stock ExchangeStock Exchange – an organized market – an organized market where listed stocks are bought and sold.where listed stocks are bought and sold.

Measured by various Measured by various Indexes :Indexes :TSX, NASDAQ, NYSE, DOW JONES, FTSE, NIKKEITSX, NASDAQ, NYSE, DOW JONES, FTSE, NIKKEI

• Stock broker – acts as an agent betweenbetween the TRADER on the floor of the exchange and any customers interested in trading shares.

• Trader – licensed to buy or sell sharesbuy or sell shares on the stock market floor. The trader fills the clients order. (see pgs. 90-91)

BondsBonds

• A written promise to pay a stated sum of money at sometime in the future, including interest.

• You are not an owner of the corporation, but a creditor (they borrowed your money).

• Must be paid first if the corporation fails.

• Governments also issue bonds (Canada Savings Bonds, War Bonds)

Corporate ControlCorporate Control

• The shareholders of a corporation ultimately control it.

• With one vote per share, they elect a board of directors at the AGM, (Annual General Meeting).

• Voters may arrange to vote by Proxy, transferring their right to vote to someone else.

The Board of Directors…..The Board of Directors…..• Appoint the company executives• Decide what is going to be produced• Set policy• Decide how profits will be distributed

• SOBEYS Board of Directors• Apple (Canada) - Apple Press Info - Apple Leadership• DreamWorks Animation SKG, Inc. - Investors Relations - Coporate

Governance - Board of Directors• Board of Directors | The Walt Disney Company• http://news.microsoft.com/microsoft-board-of-directors/• Leadership Team - Irving Oil• Extreme Group• Corporate Governance | Clearwater Seafoods

Profits can be divided by….Profits can be divided by….

• Distributed to shareholders in the form of a dividend. (amount of profit divided by the number of shares equals the dividend per share)

• Reinvesting in the corporation-Capital

• Paying off debt.

• Saving for the future.

• Bonuses to the executive.

Advantages of a CorporationAdvantages of a Corporation

• Limited liability

• Wide range of securities

• Raise large amounts of capital

• Lasts a long time

Disadvantages of a CorporationDisadvantages of a Corporation

• Control in the hands of the few

• Lack of motivation for management

• Expensive to establish

• Taxed twice

• Stock Exchange – an organized market where listed stocks are bought and sold.

Co-opsCo-ops

A cooperative is…• A business run for the benefit of its members, motivated

by the desire to save money, not make a profit.

• It issues shares to the public but each member only gets one vote, no matter how many shares they own.

• Savings in a co-op are based on a Patronage refund. Profits are distributed to the members based on the amount of business or patronage given to the co-op during the year.

Three Main Types Of Co-opsThree Main Types Of Co-ops

1. Consumer co-ops – providing savings to members on consumer goods.– groceries, bulk items, gas– Mountain Equipment Co-op – MEC – Shop climbing, cycling,

running, yoga and more

2. Producer co-ops – help producers save money. – Farmers set up co-ops to purchase fertilizer, seed, insurance

and machinery.– Canadian Wheat Board - Wikipedia, the free encyclopedia

3. Credit Unions – members make deposits, which in turned are loaned to other members. – Same services as banks. – Decisions are made by the board of directors.

AdvantagesAdvantages and and DisadvantagesDisadvantagesof Co-opsof Co-ops

• Patronage refund• Each member has equal say

• Difficulty competing in the private sector.• Less aggressive in the marketplace.• Welcome to Co-op Atlantic | Bienvenue à Coop

Atlantique• Credit Union Atlantic - Home• Moses Coady - Wikipedia, the free encyclopedia

Public Enterprise/Crown Public Enterprise/Crown CorporationCorporation

• A business run by the government to provide goods and services to the public.

• Often compete with the private sector which is seen as an unfair advantage.

• However limited by…– government cuts and privatization (selling

government assets to the private sector) have evened the playing field.

– public’s demand for balanced budgets and a reduction in deficits.

Two Types of Public EnterpriseTwo Types of Public Enterprise

• Crown Corporation– owned by the government but expected to run independently. – Ensures competition in the marketplace so that Canadians can

afford services deemed essential. (H^LIF^X Transit, CBC, Petrocanada and Air Canada in the 1970s, Postal Service)

– Petro-Canada - Wikipedia, the free encyclopedia– Petro Canada Canada First (80's) – YouTube– Trudeau ventures into Liberal desert - Politics - CBC Player– PIERRE-ELLIOTT-TRUDEAU-RIPS-OFF-CANADA

• Public Utility – a legal monopoly allowed by government to operate an essential

service, such as electricity. – Utilities are controlled by the public utilities board or NSURB

which has to approve any raise in basic service fees. (Halifax Water)

Stock Market History in modern eraStock Market History in modern era

• stockmkt.ppt

• ..\history11\GreatDepressionbest.ppt