Forms of Enterprise Flashcards
What are the 6 structures of enterprise
Sole Proprietor
Partnership
Closed corporation
Personal Liability company
Private company
Listed company
Give 3 considerations when choosing a company structure
Legal personality
Procedures of establishment
Attaining capital
What are 3 characteristics of a sole proprietorship
Owned and operated by a natural person
The owner assumes all risks of the business to the extent of all of his or her asset
Only the proprietor has the authority to make decisions for the business
What are 3 advantages of sole proprietorship
No legal or statutory requirements
Income accrues directly to proprietor
Proprietor not accountable to a board of directors
What are 2 disadvantages of sole proprietorship
No distinction between assets of business and personal assets of proprietor
Does not have benefits of perpetual succession
What is a partnership
An agreement between two or more persons who join together to carry out a trade, business or profession
What are 3 advantages of a partnership
No formalities at formation or closure
No legal or statutory requirements
Combined business skills and knowledge
What are 3 disadvantages of a partnership
Partners are jointly and separately liable for the debts of the partnership
Does not have the benefits of perpetual succession
Can be difficult to dispose of one’s interest
What is a closed corporation
A legal entity with its legal personality. It has no share capital and therefore no shareholders. The owners of a CC are the shareholders
It is governed by the Close Corporations Act
What are 3 advantages of a Close Corporation
The CC act is less complex than the Companies Act
There is perpetual succession
There is limited liability for members
What are 3 disadvantages of a CC
Members can be personally liable for debts
In the absence of association agreement, any member can enter into contracts on the CC’s behalf
Simplicity of the CC Act leads to confusion and uncertainty
What is a company
A separate legal entity, distinct from its shareholders and directors
What are the 2 requirements for a company
Memorandum of Incorporation
Registration with CIPC
What are the 3 different types of companies
A public company (Ltd)
A private company (Pty Ltd)
A personal liability company (Inc)
What are 3 advantages of a company
Perpetual succession
Easy transfer of ownership
Limited liability of shareholders
What are 3 disadvantages of a company
Difficulty and expense of formation
Regulation and increased paperwork
Agency problems
What are 3 of the considerations when choosing a company
Legal personality
Parties involved
Costs and taxation
Look through the last few slides about business ownership
