Chapter 3: Forms of Ownership

Question 1

Choosing the correct form of ownership.
-Legal persona?

Answer 1

Refers to the legal rights of a business or person to enter into contracts, own property, and sue or be sued.

Question 2

Liability:

Answer 2

Refers to who/what will be responsible for the debts of the business.

Question 3

Tax implications:

Answer 3

Refers to who is responsible to pay the tax on the profits. Registered businesses pay proportional tax, which is a set tax percentage.

Question 4

Continuity:

Answer 4

Is if the owner dies or retires, the business will still be able to run

Question 5

Management And control.

Answer 5

The owner decides if they want to be part of the day-to-day running of the business or not.

Question 6

Capital Size of the business.

Answer 6

Important to consider.

Question 7

Formation procedures

Answer 7

Refers to the different measures the business goes through to be established.

Question 8

Sole Trader
Advantages?

Answer 8

1. Quick to establish
2. Takes all the profit
3. Quick decision making
4. Tax is relatively low

Question 9

Sole trader Disadvantages?

Answer 9

1. Owner has unlimited liability for the debt of the business.
2. Growth is limited due to capital.
3. No continuity
4. Owner has to rely on their own initiative and instinct.

Question 10

Partnership- agreement between 2-20 people to combine skills and money in a business.
Advantages?

Answer 10

1. Easy to establish
2. Increased knowledge, money, and skills.
3. Better decision making
4. Partnership can be offered to a valuable employee.

Question 11

Partnership Disadvantages?

Answer 11

1. No separation between owner and business
2. Growth is limited to the amount 20 people can borrow/contribute
3. Slow decision making
4. No continuity of existence
5. Partners are jointly and severally liable for the debt of the business.

Question 12

Parastatal?

Answer 12

Is a legal entity that undertakes commercial activities on behalf of the government.

Question 13

Porters model eg. Power of…

Answer 13

1. Power of consumers
2. Power of suppliers
3. Power of substitute
   products
4. Power of competitors
5. Power of new competitors
6. Power of complementary products