Joint ventures:
Individuals, partnerships or Corporations may join force for a specific purpose.
Joint ventures are usually formed to take care of a specific project and upon completion partners are free to go their way.
No registration required for joint ventures.
An agreement usually defines roles and responsibilities of each party.
Advantages and Disadvantages:
Each participating co-venture remains a separate entity.
Co-ventures avoid responsibilities and liabilities faced by partners in a general or limited partnership.
Lack of focus on a specific activity may become an issue.
A joint venture should have an agreement in place to deal with issues like who is responsible for what.
Franchises:
A franchise is a contract between two parties.
Franchisor is the one who owns name, concept and method.
Franchisee is the one who carries franchisor’s business at one or more locations.
A franchise is not required to be registered with government.
Province of Ontario requires franchisors to disclose a broad range of information to franchisees like franchisor’s past and present financial status and how franchisee’s territories are determined.
The franchise Agreement:
A franchise agreement usually will have following points:
The franchisee will strictly observe all policies and rules.
The franchisee will use the franchisors business name and logos under strict conditions and format established by franchisor.
The franchisee will pay an initial franchise fee and make regular royalty payments.
The franchisee will contribute to franchisors advertising fund,
The franchisee will purchase stock and ingredients from franchisor.
The franchisee will renovate its premises frequently.
The franchisee will have its key persons take training from franchisor.
The franchisee will adhere to a defined geographical base of operations.
The agreement between a franchisee and franchisor will run for a limited term.
In case of default, the franchisor has the right, after the franchisee has been given notice of its default and has failed to rectify the problem, to enter the premises and assert control and operate business itself.
Advantages and Disadvantages:
Start of business under an established name and reputation.
Potential customers are familiar with the business, products and services.
Franchisor will exercise a good deal of control over how the business operates.
Franchisor’s profit potential is less than it would be with direct management.
If franchisee fails, it can be a huge burden to bear for franchisor.
Licenses:
A license is same as a franchise.
Licensee will gain access to something created by the licensor and protected by the licensor’s patent or trade mark.
Licensor gets a fee plus royalty on sales or profits.
The rights granted by a licensor to a licensee usually include following:
The right to produce or manufacture the product using licensor’s design.
The right to use product name, as long as the licensor has given permission.
The right to sell or distribute the product in return for payment of royalties on sales or profits.
In case of default, the licensor, after giving the licensee notice of its default and a reasonable opportunity to correct the default, may have the right to take back all of its designs, recipes, equipment etc.
Co-Ownership:
Co-Ownership is most common where real property is held or acquired by spouses for a specific purpose such as earning rental income.
When two or more persons assume ownership of real property, they can choose ownership as tenants in common or as joint tenants.
Tenancy in common gives each owner a separate interest.
In tenancy in common the ownership shares are not necessarily equal.
Co-Ownership does not automatically create a partnership.
Advantages and Dis advantages:
Partnership related provisions do not apply to co-ownership.
Co-Owners can deal with their own interest in the property separately.
Co-owners can take advantage of permitted deductions like depreciation.
Share an asset such as a piece of machinery needs to be repaired or replaced, the income tax act allows an amount to be deducted from income each year. The maximum amount allowed for deduction is determined by the income tax act.
An individual co-owner can sell or otherwise deal with his or her share without heeding the wishes of the other co-owners.
Co-owners also face the risk that creditors or the tax department may seek to have the co-ownership relationship declared as a partnership.
Non Profit Organizations:
There are two ways to operate as non-profit organization.
By memorandum of Association. Organizations operating this way must register their name.
Federal or Provincial Corporation without any share capital. These corporations will have members rather than shareholders. Members support the work and cause of the organization, and often pay an annual fee.
Corporation provides limited liability protection for the organization’s members and directors.
Co-operatives:
The co-operative form is used by nursery schools, food purchase centers and groups seeking to provide housing assistance or promote the interests of workers.
The purpose of the typical co-operative is not to make a large profit for the members but to provide a way for people with common interests and goals to accomplish their aims in a cost effective manner. The by-laws of the co-operative usually require the members to invest time or money in the organization to keep costs down.
References:
The fundamentals of corporate law and procedure
By Mark Walma and Patricia McCann – Smith
Publisher: Edmond Montogomery Publications Limited, Toronto, Canada.