• Sole proprietorship
• Partnership
• Joint venture
• Corporation

1. What Is It?

• when an individual carries on business in his own name
• individual owns business directly

2. Advantages

• low start up cost
• owner in direct control
• few regulations other than Business Name Act
• flow through of profit or loss to the owner

3. Disadvantages

• unlimited liability
• lack of continuity
• difficult to attract investors

1. What Is It?

(a) legal entity at common law and codified by the Partnerships Act

(b) relationship between two or more individuals or companies carrying on a business with a view to make a profit

(c) the existence of a partnership is based on fact not documents

• intent of parties
• conduct of parties
• written documents

2. General Partnership

(a) in absence of agreement, Partnership Act provides that partners:

• share equally in capital and profit
• contribute equally toward losses
• share in management
• approve new partners, majority vote
• jointly and severally liable
• are fiduciaries of each other, i.e., cannot compete with each other
• partnership is dissolved upon death or insolvency of any partner

there are limited partners whose risk is limited to their investment

there are general partners who manage partnerships and have limited liability

registered under the Limited Partnership Act

cross between corporation and partnership
 

4. Advantages Of Partnership
 

tax is calculated at partnership level but is allocated and paid at personal level

roll in property on tax free basis

roll out property on tax free basis

easy to admit new partners

no government issued document required
 

5. Disadvantages Of Partnership
 

no limited liability

other partners can contract and leave partners jointly and severally liable

cost of partnership agreement
 

capital cost allowance done at partnership level

estate is liable for debts
 
 

1. What Is It?
 

no statute applicable

"association of two or more persons based on a contract which combine money, property, knowledge of other resources for a particular project, agreeing to share revenue and losses and each having a degree of control over venture"

sharing of revenue, not sharing of net profit

not a separate legal entity

it involves the co-ownership of property but not a partnership

each party can deal with interest in property subject to agreement
 

2. When To Use It
 

when owner wants to retire but keep ownership of assets and associate runs business for share of proceeds
 

3. Advantages
 

liability for acts of partners does not apply

not liable for debts of other parties in the joint venture

tax is calculated, allocated and paid at the personal level

can choose separate fiscal period

less fiduciary obligation to other party

no dissolution on death of a party

no deemed disposition on death
 

4. Disadvantages
 

must be carefully worded to avoid being partnership

transfer of interest requires conveyance

no limited liability unless a corporation is used

5. Drafting The Joint Venture Agreement
 

(a) court will look to see:

what was intent of parties?
 
 
 

were the parties carrying on a business in commerce?
 

(b) therefore to avoid a partnership agreement you need to:

declare parties are not partners

declare that they are not agents

sharing of gross revenue not profit

allocate revenue and expense

prohibit joint bank accounts

require separate accounting

confirm that they are not carrying on business
 
 

1. What Is A Corporation?
 

it is a separate legal entity

it may own property in its own name

it may sue and be sued in its own name

the corporation owns the business, not the shareholders

the shareholders own the shares in the company
 

2. How Is A Corporation Formed?
 

an application for incorporation is filed with the Provincial Government

articles of incorporation are issued

organizing corporate records are established in a minute book

shares are issued

directors are elected

officers are appointed

initial notice is filed with the government

banking documents are prepared

corporate name is put in use

assets and financing are acquired
 

3. The Advantages Of Incorporation
 

limited liability for shareholders, except where personal guarantee

lower income taxes for income retained in the company

possible income splitting with spouse and children

corporate pension plans can be established

can establish a year end other than December 31st

a corporation does not die even when its shareholders die
 
 
 

ownership of shares is easily transferred

estate planning potential

enhanced capital gains exemption

no land transfer tax or g.s.t. on transfer of shares

spousal shareholder agreement can provide for transfer of shares to spouse for $1.00 in the event of bankruptcy
 

4. The Disadvantages Of Incorporation
 

the initial expense of incorporation

the additional cost of roll-over of assets

maintaining corporate records

losses in the corporation remain in the company

directors may be faced with personal liability

personal liability may occur from improper use of corporate name
 
 
 

DISCLAIMER: This summary of Forms of Business Organizations is distributed with the understanding that it does not constitute legal advice or establishing the solicitor/client relationship by way of any information contained herein. The contents are intended for general information purposes only and under no circumstances can be relied upon for legal decision making without first consulting with a lawyer and obtaining a written opinion concerning the specifics of your particular situation.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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