Sole Proprietorship-The Simplest Form of Business

-oldest, simplest form of business

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-no legislation pertaining to sole proprietorship as such but may need to obtain business license and register trade name(Donald Trump International Trade Consultant, name of grandma, successful management firm)(if you don’t register, you can’t sue)

-an unincorporated business organization that has only one owner

-owner has unrestricted legal responsibilities for obligations

-easy to set up, but business obligations are personal obligations

-no legal distinction between the business and its owner

-Owner has unlimited personal liability for all debts and obligations of the business

Ex -Bank Loan-Owner must repay the loan

-Breach of Contract-Owner is personally liable for breach

-Tort committed by the employee-Owner is personally liable



-speed and independence

-profit motive

-lower cost

-tax benefits-can claim business expenses

-control over decision making


-unlimited personal liability

-working alone (but can have employees)

-limited access to capital (can only borrow)

-limited life span (dies with owner)

-tax disadvantages (must claim all business income with personal taxes)



A business carried on by 2 or more people with the objective of making a profit

-similar to sole proprietorship, in that neither has a legal personality, or legal existence, separate from the people who comprise them


Rules of Governing Partnership

Sources of Law

-Partnership legislation (in place in every province)

-Contract Law

-Agency Law

(MP in Ottawa cheats, but gets catfished, posts private photos, blackmail, catfish is from Africa in Ottawa


Financial Liability in partnership

-Partners are fully responsible for all debts of the partnership

Joint Liability- Liability is shared by 2 or more parties(partners), where each is personally liable for the dull amount of the obligation

-Bank can proceed against the partner with the most assets


Partnership Act

-Sets out default rules for partnerships that can be varied by written agreement

-The Partnership Act-A partnership exists when 2 or more people “carry on business with a view towards profit”

-The Partnership Act provides that partners are agents of one another as well as agents of the firm in matters relating to the partnership business

-Partners also owe a fiduciary duty to each other

-The statutory definition of partnership covers people who expressly intend to be partners as well as people who may not necessarily intend to be partners but act as if they are partners (cottages, 2people decide to joint rent a cottage to cut rent, 1 person had a canoe that was leaking, puts glue on canoe, glue melts from heat, glue separates from fiber glass, person renting a canoe decides to use it, people stand up)


Partnership Agreements

-Highly recommended

-If no written agreement, default rules from Partnership Act will apply

-Agreement should be periodically reviewed

Agreement should address the following issues:

-Creation of partnership

-Capital contribution

-Decision making

-Profit Distribution

-Changes to Partnership

-Dissolution of partnership


Default Partnership Rules Under Partnership Act

-All partners are to share equally in the capital and profits of the business and contribute equally to losses

-Property acquired shall be used exclusively for the partnership

-Partner shall be indemnified by the other partners for any liability incurred on behalf of partnership

-A payment made by a partner in excess of his/her agreed subscription shall earn interest

-Each partner may take part in the management of the business

-No partner is entitled to remuneration for acting in the partnship business

-Disputes may be decided by a majority-one must have consent of all members

-No new members is admitted without consent of all partners

-Partnership books shall be kept at partnership’s place of business

-No simple majority may expel any partner


Joint and Several Liability

The Partnership Act and the law of agency make partners jointly and severally liable for all obligations of the business

Joint and Several Liability-Individual and collective liability for a debt. Each liable party is individually responsible for the entire debt as well as being collectively liable for the entire debt.

Ex If Adam gives poor advice to a client as to its computer system needs and is used for the tort if negligence, all the partners, not just Adam is liable




-Lower Cist

-Greater access to capital

-Profit Motive

-Tax benefits


-Unlimited personal liability

-Loss of speed and independence

-Limitations on transferability

-Profit sharing

-Tax disadvantages


Managing Risk in Partnership Relationships

-Choose partners with care

-Educate partners on their authority, its limits, and consequences of exceeding them

-Monitor activates of partners

-Notify clients and customers of the departure of partners to prevent being held liable for debts contracted by departed partners

-Insure against liabilities for wrongdoings


Limited Partnership

-A partnership in which the liability of some of the partners is limited to their capital contribution, bring 10% money get 10% money, responsible for 10%

-At least 1 partner has unlimited liability(the general partner(s)), while others have limited liability (1 person has 90%, gets 90% of profits, 90% debts)

-General partners have unlimited liability

-Limited partners have a liability limited to the amount that they have contributed to the partnership capital


Limited Liability Partnership (LLP)

-A partnership in which the partners have unlimited liability for their own malpractice but limited liability for another partners’ malpractice

-Designed to address concerns of professionals who are not permitted to use incorporation as a means of achieving limited liability

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