Forms Of Ownership

Question 1

FACTORS THAT MUST BE CONSIDERED

CONCEPTS AND DESCRIPTION

Answer 1

Continuty ➡️ the ability of the business to continue after the death or retirement of the owner or more than one of the owner.

Liability ➡️ Limited liability: the owners will not lose their personal assets.
➡️ Unlimited liability: the owners may lose their personal assets if the declared insolvent.

Question 2

DIFFERENT FORMS OF OWNERSHIP

Answer 2

PROFIT

ORGANIZATIONS / COMPANIES.

📌Objectives is to make profit for the owners.
📌 Capital contributed by owners
📌 Responsible for paying tax.

NON-PROFIT

ORGANIZATIONS /COMPANIES

📌Objectives is to promote a social cause
📌 Funds from donation and government grants are the main source of capital.
📌Exempted from paying tax.

Question 3

1. SOLE PROPRIETOR

CHARACTERISTICS AAND DESCRIPTION

Answer 3

Name ➡️ no legal requirements regarding the name of the business.
No. Of owners ➡️ 1 owners
Management ➡️ can make quick decisions without consulting others.
Legal requirements ➡️ no legal and administrative formalities.
Liability ➡️ Unlimited liability
Legal personality ➡️ not a legal entity and agreements entered.

Question 4

CHARACTERISTICS AND DESCRIPTION

Answer 4

Continuity ➡️ no continuity
Capital ➡️ personal debt and business debt, should be carefully spent and managed
Profit sharing ➡️ belongs to the owner
Taxation ➡️ depends on the income earned by owner.

Question 5

Advantage

Answer 5

📌 Easy & cheap to establish
📌 Quick decision-making
📌 Owners receive all the profit

Question 6

Disadvantages

Answer 6

📌 Unlimited liability
📌Has no legal personality & continuity
📌 Owner accepts all risks

Question 7

2. PARTNERSHIP

CHARACTERISTICS AND DESCRIPTION

Answer 7

Name ➡️ no legal requirements regarding the name of the business
No. Of owners ➡️ at least 2 partners
Management ➡️ partners share responsibilities and decision making
Capacity ➡️ Expansion is possible because more partners join partnership
Legal requirements ➡️ no legal formalities to start
Liability ➡️ have unlimited liability, are jointly and separately liable for the debts

Question 8

CHARACTERISTICS AND DESCRIPTION

Answer 8

Legal personality ➡️ has no legal personality
Continuit ➡️ no continuity because if there are two partners and one dies
Capital ➡️ combine capital and may also borrow capital
Profit sharing ➡️ shared according to the partnership agreement
Taxation ➡️ don’t pay tax, the pay personal income tax

Question 9

ADVANTAGES

Answer 9

📌Relatively easy & cheap to establish
📌Easier to get credit
📌All benefit from profit

Question 10

DISADVANTAGES

Answer 10

📌Unlimited liability
📌Has no legal personality & continuity
📌Partners may disagree.

Question 11

3. CLOSE CORPORATION

CHARACTERISTICS AND DESCRIPTION

Answer 11

Name ➡️ must end with cc
No. Of owners ➡️ 1-10 members
Management ➡️ Ford close means that all members are involved
Capacity ➡️ transfer of the interest of a member must be involved
Legal requirements ➡️ few legal requirements
Liability ➡️ members have limited liability, CC has 6 months or longer than ten members

Question 12

CHARACTERISTICS AND DESCRIPTION

Answer 12

Legal personality ➡️ has a legal personality
Continuity ➡️ Unlimited continuity
Capital ➡️ each member contributes certain assets
Profit sharing ➡️ shared in proportion to the interest of the members of the CC
Taxation ➡️ pay tax on the profit of the business and divideds of the members.

Question 13

ADVANTAGE

Answer 13

📌Limited liability
📌Legal personality & continuity
📌Easy & cheap to establish

Question 14

DISADVANTAGES

Answer 14

📌Capital limited to 10 members
📌Decision take time
📌Could lead to conflict

Question 15

4. PRIVATE COMPANY

CHARACTERISTICS AND DESCRIPTION

Answer 15

Name ➡️ ends with the letters (PTY) Ltd
No. Of owners ➡️ at least 1 shareholder
Management ➡️managed a least by one skilled director.
Capacity ➡️ no limit to the number of shareholders
Legal requirements ➡️ registrar by companies by setting memorandum of incorporation (MOI)
LIABILITY ➡️ shareholders have limited liability

Question 16

CHARACTERISTICS AND DESCRIPTION

Answer 16

Legal personality ➡️the business has a legal personality
Continuity ➡️ as well as unlimited continuity
Capital ➡️ raised by issuing shares to it’s shareholders
Profit sharing ➡️ shared in the form of dividends in proportion to the number of shares held
Taxation ➡️ pay tax on the profits of the business and declared dividends of shareholders

Question 17

ADVANTAGES

Answer 17

📌Limited liability
📌Legal personality & continuity
📌No AGM necessary

Question 18

DISADVANTAGES

Answer 18

📌Complex establishment process
📌Subject to double taxation
📌Can only rely on capital contributed by members

Question 19

5. PERSONAL LIABILITY COMPANY

Answer 19

📌It is very similar to a private company, and the DIRECTORS of a personal liability company are jointly and separately liable for all debts and obligations of the company. This means that the directors have unlimited liability.

Question 20

CHARACTERISTICS AND DESCRIPTION

Answer 20

Name ➡️ must end with INC
No. Of owners ➡️ at least 1 shareholder
Management ➡️ have at least one director to their board
Capacity ➡️ no legal to the number of shareholders
Legal requirements ➡️ in the MOI must be stated
Liability ➡️ directors have unlimited liability and are jointly liable for the debt

Question 21

CHARACTERISTICS AND DESCRIPTION

Answer 21

Legal personality ➡️business has a legal personality
Continuity ➡️ as well as unlimited continuity
Capital ➡️ capital raised by issuing shares to it’s shareholders
Profit sharing ➡️ shared in the form of dividends in proportion of the number of shares held
Taxation ➡️ pay tax on the profit of the business and declared dividends of shareholders

Question 22

ADVANTAGE

Answer 22

📌Limited liability
📌Legal personality & continuity
📌No AGM necessary

Question 23

DISADVANTAGES

Answer 23

📌Complex establishment process
📌Subject to double taxation
📌Can only rely on the contributed by members

Question 24

6. PUBLIC COMPANY

Answer 24

📌A public company is registered to offer its shares to the general public. Designed for large scale business that require large capital investments

Question 25

CHARACTERISTICS AND DESCRIPTION

Answer 25

Name ➡️ must end with Ltd
No. Of owners ➡️ at least 1
Management ➡️ law forces personal liability on the directors who were consciously reckless
Capacity ➡️ many people can join the company
Legal requirements ➡️ registrar of the companies by setting the memorandum
Liability ➡️ shareholders have limited liability

Question 26

CHARACTERISTICS AND DESCRIPTION

Answer 26

Legal personality ➡️ business has a legal personality
Continuity ➡️ as well as unlimited continuity
Capital ➡️ raised by issuing shares to the public and borrow capital by issuing debentures
Profit sharing ➡️ shared in the form of dividends in proportion to the share held
Taxation ➡️ pay tax on the profits of the business and declared dividends of shareholders

Question 27

ADVANTAGES

Answer 27

📌Limited liability
📌Legal personality & continuity
📌Can obtain a large amount of capital

Question 28

DISADVANTAGES

Answer 28

📌Complex establishment process
📌AGM must be held
📌Failure could lead to large scale unemployment

Question 29

7. COMPANIES IN STATES OWNED

Answer 29

📌In a state owned company, the government is the largest shareholders and falls under the Department of Public Enterprises
📌These businesses take behalf of the government the role of commercial enterprises

Question 30

CHARACTERISTICS AND DESCRIPTION

Answer 30

Name ➡️ must end with SOC Ltd
No. Of owners ➡️ requires 3 or more directors and 1 or more shareholders
Management ➡️ shareholders vote for the competent directors
Capacity ➡️ people join the company by issuing shares to the public
Legal requirements ➡️ registrar of the companies by setting up the memorandum of incorporation
Liability ➡️ shareholders have limited liability

Question 31

CHARACTERISTICS AND DESCRIPTION

Answer 31

Legal personality ➡️ business has a legal personality
Continuity ➡️ as well as unlimited continuity
Capital ➡️ company has access to long-term capital and therefore good long-term opportunities for growth
Profit sharing ➡️ profits are shared in the form of dividends
Taxation ➡️ pay tax on the profit of the business and declared dividends of shareholders

Question 32

ADVANTAGES

Answer 32

📌Limited liability
📌Legal personality & continuity
📌Supporting of government

Question 33

DISADVANTAGES

Answer 33

📌Rely on subsidies from the government
📌Losses must be paid by the taxpayers
📌Difficult to raise capital because stock is limited

Question 34

9. CO-OPERATIVES

Answer 34

📌A Co-operative is a traditional way in which a group of interested parties gathered and resources.

Question 35

CHARACTERISTICS AND DESCRIPTION

Answer 35

Name ➡️ use of ‘co-op’ in the name. Ends with limited
No. Of owners ➡️ At least 5 members are required to start a cooperative
Management ➡️ members own and manage the business together
Capacity ➡️ purpose a cooperative is to create mutual benefit for the members
Legal requirements ➡️ must register with the registrar of Co-operative societies
Liability ➡️ members have limited liability

Question 36

CHARACTERISTICS AND DESCRIPTION

Answer 36

Legal personality ➡️ business has a legal personality and are allowed to own land
Continuity ➡️ business has unlimited continuity
Capital ➡️ amount of capital that can be obtain by Co-operative
Profit sharing ➡️ profits are shared equally amongst its members
Taxation ➡️ pay tax on income retained for investment and reserves and surplus revenues are returned

Question 37

ADVANTAGES

Answer 37

📌Limited liability
📌Legal personality & continuity
📌Facilities of members are combined to achieve common goals

Question 38

DISADVANTAGES

Answer 38

📌Unable to pay high salaries
📌Auditing of financial statements compulsory
📌Success depends on loyalty, commitment and support of it’s members