LAW 122 Lecture Notes - Lecture 5: Limited Liability Partnership, Sole Proprietorship, General Partnership
30 Apr 2018
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February 28, 2018 LAW122 – Lecture 5
1
Overview
• Fringe Entitles
• Sole Proprietorship
• Partnerships
o General (GP)
o Limited (LP)
o Limited Liability (LLP)
o Joint Ventures
• Corporations
o Shareholders
o Directors
o Executives
BUSINESS ORGANIZATION (CHAPTER 21)
Overview
• Types of Business Organizations:
o Sole proprietorships
• Partnerships
o General Partnerships
o Limited partnerships
o Corporations
• Liability and benefits of entrepreneurs
and other stakeholders differ
depending on type used
Tactical Themes
Fringe Formats
• State Enterprises:
• SOE
o Non-Democratic Context
o Family Pact context
o Transparency Issues
o Funding and Control Issues
• Crown Corporations
o Statute Creates and Empowers
o Ministerial Input
o 78 in Canada
• Airport Authorities
o Statutory
o Transparent
• Agencies
o Subsect of Crown Corporations
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February 28, 2018 LAW122 – Lecture 5
2
o More flexibility than a Crown department / ministry but not as much as a stand-
alone Crown Corporation
• Special Corp
o Banks
o Insurance
o Trust Companies
o Brokerages
• Franchises / Distributorships
• Business Trusts
• Joint Ventures
• Strategic Alliances
• Dynasties
SOLE PROPRIETORSHIPS
• Arises once person begins to conduct business
o E.g. start cutting someone’s lawn for money
• No separation between business and proprietor (owner):
o proprietor entitled to all income
o proprietor liable for all obligations
o proprietor’s assets available for business debts
o business income (loss) on personal income
o proprietor cannot be employee of business
Advantages and Disadvantages
Advantages: Simple to start, simple to administer, possible tax advantages
Disadvantages: Unlimited personal liability, can only raise money by personal borrowing, as
business grows these problems will continue to grow
Conclusion: A sole proprietor is best suited for small businesses
Legal Requirements
• No formal registration as a “sole proprietorship” is required. (Compare this to
incorporation, where formal steps are required.)
• But sole proprietors must comply with the general requirements imposed on all
businesses.
o e.g. may need to register a “doing business as” (DBA) name
o e.g. May need to acquire a particular license, e.g., hot dog vendor permit or
spectrum license
PARTNERSHIPS
Partnerships: Typology
Three main types of partnerships
• partnership (sometimes called “general partnership”)
o Exists when two or more people carry on business together to view a profit
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find more resources at oneclass.com
February 28, 2018 LAW122 – Lecture 5
3
• limited liability partnership (or “LLP”)
• limited partnership
Caution! Partnership Guidelines
There are no formal requirements for creating a partnership. The creation of a partnership is
automatic: a partnership comes into existence in law when two or more people carry on
business together with a view to profit, without the need for any further formality. This
means that a person can become part of a partnership without necessarily realizing it!
Traits – General Partnership
• Not a separate legal entity
• Each partner an agent for the partnership
• Each partner liable for the contracts and torts of the partnership irrespective if he or she
o signed the contract or committed the injury
• Partner cannot be an employee
Partnerships and Profit
PROFIT = [GROSS REVENUES] – COSTS
Q: Where does a person’s interest and capacities lie? In receiving money from revenues or in
profits (implying some control over the costs)?
Partnerships and Relationships
“Carrying on business together”: Not a casual, one-off transaction
Factors Indicating Partnerships
• Sharing profits (not just revenues) or losses
• Jointly owning property or jointly contributing capital
• Involvement in business – especially management
• Joint authority for contracts and bank account
• Equal access to business information
• Holding each other out as partners or acquiescing
• Engaging in ongoing activity rather than one project
• Consider the risks of unintended partnership
Partnership Characteristics
• No separation between partner and partnership
• Partners have unlimited personal liability
• Income to partnership is personal income to partners
• Ontario Partnership Act
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Overview: fringe entitles, sole proprietorship, partnerships, general (gp, limited (lp, limited liability (llp, joint ventures, corporations, shareholders, directors, executives. Overview: types of business organizations, sole proprietorships, partnerships, general partnerships, limited partnerships, corporations, liability and benefits of entrepreneurs and other stakeholders differ depending on type used. Fringe formats: state enterprises, soe, non-democratic context, family pact context, transparency issues, funding and control issues, crown corporations, statute creates and empowers, ministerial input, 78 in canada, airport authorities, statutory, transparent, agencies, subsect of crown corporations. Advantages: simple to start, simple to administer, possible tax advantages. Disadvantages: unlimited personal liability, can only raise money by personal borrowing, as business grows these problems will continue to grow. Conclusion: a sole proprietor is best suited for small businesses. Three main types of partnerships: partnership (sometimes called general partnership , exists when two or more people carry on business together to view a profit. Law122 lecture 5 limited liability partnership (or llp ) limited partnership.
