Module 2 Business Overview. 2Aboriginal Banking Module 2: Business Overview Table of Contents:...

Module 2Business Overview

2 Aboriginal Banking

Module 2: Business Overview

Table of Contents:

> Types of Business Ownership

> Risk or Opportunity

> Tips for Writing Effective Business Documents


Types of Business Ownership

Sole Proprietorships:

The most common form of business ownership in Canada is sole proprietorships. This form of ownership accounts for approximately 75% of all businesses within Canada.

Advantages:

1. Easy to start and end: All someone needs to do is buy their equipment, obtain all the proper business licenses, and open the doors.

2. You’re the Boss: All decisions are yours, right or wrong.

3. Owners Pride : With the risk comes the reward, entrepreneurs are rightfully proud of their accomplishments.



4. Profit: No limit to profits, the more you work … you do not have to share the rewards with anyone else.

Disadvantages:

1. Unlimited Liability: Any debts and/or obligations are both the businesses debt and your personal debt. There is no separation between business and personal assets.

2. Limited Investment: The only money invested will be what the owner can come up with from savings, friends, and financial institutions.

3. Time: The owner is responsible for all aspects of the business that leads to long hours and incredible commitment.



4. Limited Benefits: Unlike working for someone else there is no vacation pay, sick pay, and insurance.

5. Limited Life Span: Usually when the owner quits or dies the business ceases to operate.



Partnerships: General and Limited

Partnerships involve 2 or more individuals in business. Although easy to start, it always recommended that you get legal counsel to protect each other.

Advantages:

1. Increased Investment: The more partners – the more money that can be raised.

2. Shared Management: Partners share responsibilities that decrease their time commitment to the business. Easier to manage day-to-day activities.



Disadvantages:

1. Liability: General partnerships have the same unlimited liability as sole proprietorships. Limited partners, partners that have no active role in management of the company only risk their investment, they are not liable for the businesses debt.

2. Profit: Profits must be shared among partners. It is important to get profit sharing agreement with partners to avoid any conflicts.

3. Environment: The more partners, the more difficult it is to reach consensus concerning business decisions.



4. Dissolution of Business: Once all the partners are committed it is very difficult to terminate the relationship. Who gets what, how will any monies be divided, etc.



Corporations:

When thinking about “corporations”, most people envision big business. This is not the case any business can incorporate. The majority of incorporated businesses do so to take advantage of current corporate tax laws.

Advantages:

1. Investment: Public corporations can raise large amounts of capital through the sale of “shares”. This investment can reduce the need for the original owners to supply all the money.



2. Size: Because of the ability to raise capital through the sale of shares, corporations can afford to build large state-of-art factories.

3. Separation of Management and Ownership: Corporations are viewed as separate legal entities from the owner(s). This means the corporation is a separate legal entity and the owners cannot be held personally liable for the corporations’ debts or obligations.

4. Limited Liability: Literally means the owner(s) cannot lose more than their investment in the business.

5. Ease of Ownership Change: Easy to change ownership – just sell your shares.



6. Longevity: Death or departure of the owners does not terminate the life of the corporation.

7. Tax: Corporations pay a lower base rate of taxes than other forms of business ownership. In addition, lower personal rates of income tax on any dividends from the corporation.


Risk or Opportunity?

Only 1 in 7 of those businesses that "disappear" actually "fail"

Of those who actually failed,

53% became owners of another business

73.2% said they plan to start a business in the future

WHAT ARE SOME OF THE REASONS BUSINESSES

DISAPPEAR?


Risk or Opportunity?

> Sold the idea to another person or company

> Retired and closed the doors

> Found a better idea for a business

> Invented a different type of product

> Moved the business to another state or country

> Preferred to work for someone else instead

> Actually failed/went bankrupt

> The market for this type of business disappeared or became too competitive

> Owner died or became disabled


Tips for Writing Effective Business Documents

> Know to whom you are writing– Who is my reader?– What does my reader know about my topic?– What is my reader’s background?– What is my reader’s attitude toward me and/or the topic?– Who else may read what I write?



> Know why you are writing.– What do I want my reader to do after reading my document?

– What do I want them to know or understand?

– What attitude do I want them to have?• Choose your ideas.

• Decide on the order.

• Design a format.

• Choose a style.



Draft your document. Write and revise.

> Let your document cool—to improve your objectivity.

> Edit for correctness.

E-Spiritwww.bdc.ca/en/espirit

Module 2 Business Overview. 2Aboriginal Banking Module 2: Business Overview Table of Contents:...

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