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13
Structure
Advantages
Disadvantages
Sole proprietorships
– Simplest way to set up a business. A sole
proprietor is fully responsible for all debts
and obligations related to his or her
business.
– low star t-up costs
– greatest freedom from regulation
– owner in direct control of decision making
– minimal working capital required
– tax advantages to owner
– all profits to owner
– unlimited liability
– lack of continuity in business organization
in absence of owner
– difficulty raising capital
Joint Venture
– An agreement in which two or more
persons combine their resources in a
business with a view to making a profit.
– Not a legal entity.
– simple and flexible
– star t-up and wind-down relatively easy
– provides some degree of limited liability
– assets remain individually owned
– can work well for businesses in transition
– no tax advantages over sole proprietorship
(taxes are distributed to all individuals)
Partnership
– An agreement in which two or more
persons combine their resources in a
business with a view to making a profit.
– Land, equipment and other assets may be
owned by the par tnership.
– A legal entity, very similar to a limited
company.
– relatively low star t-up costs
– additional sources of investment capital
– provides some degree of limited liability
(Limited Par tnership)
– broader management base
– the general par tner has unlimited liability
– lack of continuity
– difficulty raising additional capital
– hard to find suitable par tners
– possible development of conflict between
par tners
– can be difficult to wind-down
Corporation (limited company)
– A legal entity separate from its owners, the
shareholders.
– limited liability
– specialized management
– ownership is transferable
– continuous existence
– separate legal entity
– possible tax advantage
(i.e. lower business tax)
– easier to raise capital
– closely regulated and most expensive form
to organize
– char ter restrictions
– extensive record keeping necessary
– taxation concerns
New Generation Co-op
– Specific type of cooperative designed for
agricultural value-added processing.
– Legal entity in Alber ta as of April, 2002.
– provides for the issue of designated shares,
which carry the right (and obligation) to
deliver
– can be used as marketing co-ops
– suited to community-based projects and
fund-raising
– star t-up costs may be high (legal and
accounting)
– may be tax disadvantages (compared to
limited company)
– co-op philosophy not shared by some
investors
– may be difficult to achieve good
management