Business Studies Gr 10 Term 2 #3 Flashcards
Forms of ownership
what is a sole proprietor/trader
o A sole trader is a business that is owned and managed by one person.
o The business owner handles everything including the activities of the business, its processes and decisions
What is partnership
o An agreement between two or more people who combine labour, capital and resources towards a common goal.
o Partners share the responsibility of the business and they share the financial and management decision of the business.
Meaning of close cooperation
- It is businesses that is owned by members and can have between one and ten members
close cooperation characteristics
- Can have a minimum of one and maximum of ten members who share a common goal.
- The name must end with CC.
- Members of the CC both own and control the business.
- Profits are shared in proportion to the member’s interest in the CC.
- A CC has its own legal personality and therefore has unlimited continuity.
- Each member makes a contribution of some/assets/services towards the corporation.
- The word ‘close’ means that all members are involved and participate in its management.
- Members have unlimited liability except where the CC has had more ten members for six months or longer.
- Auditing of books is optional as members only need an accounting officer to check financial records.
- Transfer of a member’s interest must be approved by all other members.
- Members of the CC are paid according to the percentage interest owned by each.
Advantages of close cooperation
- Limited Liability
- Legal personality and continuity
- Easy and cheap to establish
- None AGM (annual general meeting) necessary
- Financial statements need to be audited
disadvantage of close cooperation
- Capital limited to 10 members
- If a member acts without expertise and care, the member shall be liable for losses
- Banks require a financial audit for loans
- Decisions take time
- Could lead to conflict
meaning of a non-profit company
o A non-profit company/NPO is not formed with intent to make a profit, but established for public benefit.
meaning of a profit company
o The company is established for only one aim and that is to make profit.
meaning of a co-operative company
- A cooperative is a traditional way of a group of interested parties getting together and sharing resources/infrastructures and costs to achieve a better outcome.
characteristics of a co-operative company
- Minimum of five members is required to start a cooperative.
- The word ‘Cooperative Limited’ must appear at the end of its name.
- They are motivated by service rather than profit.
- They are managed by a minimum of three directors.
- Decisions are taken democratically
- Members own and run the business together and share equally in its profits
- Legal entity (is a legal construct through which the law allows a group of natural persons to act as if they were a single person for certain purposes and can own land and open bank accounts)
- Must register with the Registrar of Cooperatives Societies
- The objective of a co-operative is to create mutual benefit for the members.
advantages of a co-operative company
- Limited liability
- Legal personality and continuity
- Facilities of members are combined to achieve common goals.
- Better production due to loyal and dedicated members because they work for themselves
- Decision-making by a group which is democratic and fair
disadvantages of a co-operative company
- Unable to pay high salaries
- Success depends on loyalty, commitment and support of its members
- Can be difficult to obtain loans, because the main objective is not always to make a profit
- To reach a decision is often difficult and time consuming
- Auditing of financial statements compulsory
