Forms Of Ownership Flashcards
What are the forms of ownership?
Sole trader Partnership Close corporations Private company Public company
What is a sole trader?
An individual who owns a particular business on their own.
What is a partnership?
A business with a minimum of 2 owners, maximum of 20.
What are close corporations?
A company started by a select few individuals. Minimum of 1, maximum of 10 members.
What is a private company?
A company started under private ownership, and nobody from the public can buy shares.
What is a public company?
A company who’s shares are traded freely on the JSE (Johannesburg Stock Exchange)
Anyone can buy shares.
What are advantages of a sole trader?(5)
Easy to set up-only need a trading license. Full control over the business. Receive all profits. Don’t need financial statements audited. Inexpensive to set up.
What are disadvantages of sole trader?(6)
Your responsibility completely.
You’re liable for all businesses debts.
Have to close the business when sick or on holiday.
Pay tax personally.
Need good managerial skills.
Small business-seldom lots of money to invest for business growth.
What are the advantages of partnership?
More capital capacity.
Full control over business.
Don’t need financial statements audited.
Inexpensive to set up.
What are the disadvantages of a partnership?(4)
Could lose personal assets if business fails.
No continuity.
Difficult if you differ in opinion.
Decisions need to be agreed on by all partners-slow down decision making.
What are the advantages of close corporations?(5)
Raise more money than sole trader.
Is continuity.
Assets of members are protected+liability is limited.
More than 1 member=combined skills+assets lead to positive growth.
Financial statements don’t need to be audited.
What are the disadvantages of a close corporations?(3)
Profits shared between all members.
Legal formalities.
Higher tax rates.
What are the advantages of a private company?(3)
Separate Legal entity.
Company owners protected by companies act.
Continuity.
What are the disadvantages of a private company?(3)
Expensive to register.
Annual General Meeting must be held.
Financial statements must be audited.
What are the advantages of a public company?(2)
Raise lots of capitol.
Has continuity.
