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Business GR10 June And November Exam > Forms Of Ownership > Flashcards

Forms Of Ownership Flashcards

1
Q

Sole proprietor/Sole trader

A

Exists when a business is owned by one individual person. Owner handels all processes and decisions( not registered)

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2
Q

Choosing a Form of ownership

A

Factors that will affect the decision on Forms of ownership

  • Size and nature
  • Amount of control you would like
  • The need for reinvestment into the business
  • Tax implications
  • Vulnerability of the business in terms of lawsuits and likelihood of bankruptcy
  • The amount of money you would like to earn from the business
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3
Q

Limited Liability

A

The business debts are not the liability of the members

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4
Q

Unlimited Liability

A

Personal responsibility for all of the businesses incurred debts

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5
Q

Natural person

A

Living human being with certain rights and responsibilities under the law

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6
Q

Legal person/artificial person

A

A group of people that is considered by law to be acting as a single individual (can be sued and is entitled to sue other parties)

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7
Q

Characteristics of Sole proprietor

A
  • Full control
  • Keep all profits
  • No high costs for starting the business
  • Easy to start
  • Pay personal tax on their profits
  • No continuity
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8
Q

Partnership

A
  • Owners are called partners(Silent/sleeping or active partner)
  • Not a legal entity
  • Owned by 2-20 people
  • No formal steps necessary
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9
Q

Advantages of a Partnership

A
  • Money invested can help the business grow
  • Shared workload and have new skills and ideas that help you and the business
  • It is easy to start, only need an oral or written agreement between you and the other partner
  • You and partners share all profits
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10
Q

Disadvantages of Partnerships

A

You and your partners are all liable for the businesses debts, so if the business fails, you could lose your personal assets(Unlimited liability)

  • If one of the partners dies or withdraws from the partnership, the partnership dissolves
  • It can end up being difficult to work with a partner if you differ in opinion, can make the business inefficient
  • All Decisions have to be agreed upon by all partners which can slow down decision making
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11
Q

Closed Corporation

A

Can have from one to ten members

  • Owners are called members
  • The businesses name needs to end in CC
  • Legal agreement of a CC is known as a founding statement
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12
Q

Private company ((Pty)Ltd)

A

To start a private company, you need to register your business with the CIPC.

  • You also need to complete a Notice of Incorporation and reserve a company name
  • Private Company ends in (Pty)Ltd
  • Managers are called directors
  • Owners are called shareholders
  • Can have 1-50 shareholders
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13
Q

CIPC

A

Company
Intellectual
Property
Commission

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14
Q

CIPRO

A 
Companies
Intellectual 
Property 
Registration 
Office
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15
Q

Advantages of Private company

A
  • Separate legal entity
  • Shareholders are protected by the Companies Act
  • If shareholders die or sell their shares in the company, the company continues to exist. We say that it has continuity, unlike a partnership.
  • Often more opportunities to pay less tax
  • Long-term growth opportunities are good
  • More likely to take risk and allow growth for the business
  • Able to employ or elect their own management and the directors can be appointed on merit
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16
Q

Disadvantages of private Company

A
  • It is expensive to register because there are so many legal requirements
  • A meeting of all the shareholders must be held every year,regardless of where the shareholders live.
17
Q

Characteristics of a Private Company (profit section)

A

Can have between 1-50 members
Need to register with the Registrar of Companies and a MOI needs to be drawn up
Limited Liability - no shares offered to the public
Investors invest with the idea to earn profit on their shares

18
Q

Non-profit organizations

A

Serve a public purpose or cause
Has a founding document- a written agreement of the rules, aims and objectives, governance structures and rights and responsibilities

19
Q

Advantages of NPO

A
  • Tax exemption
  • Fixed management structures in place to ensure that the aims of the organization are met, many people are prepared to give time and effort on a voluntary basis
  • Organization does not cease to exist if some members pull out
  • Some organizations don’t have to be registered in terms of the NPO Act. A voluntary association can just be an agreement between parties with a common goal
20
Q

Disadvantages of NPO

A
  • Unable to generate their own profits and rely on generous donations
  • Management structure appointed are forced to follow the constitution of the organization
21
Q

MOI

A

Memorandum Of Incorporation

22
Q

Personal Liability company

A

Similar to a private company. The difference is that Private company has limited liability and Personal Liability has unlimited Liability

23
Q

Advantages of Public Company

A

The business has its own legal identity( limited liability)
Easy for public companies to raise funds for growth
Each shareholder is only liable for the amount that is invested

24
Q

Disadvantages of Public Company

A
  • Stocks have to be traded publicly
  • A full report must be submitted to the major shareholders each year
  • Required to disclose all your financial information, which could provide the competitors with an unfair advantage
25
Q

Franchise

A

Public Company with more that one branch. Like pick n pay, checkers and woolworths

26
Q

FASA

A

Franchise Association of South Africa

27
Q

New Franchise advantages

A
  • lower start up cost
  • independence and creative freedom
  • freedom with location
  • no inherited problems
28
Q

Buying a New Franchise

A
  • Reduced risk of failure

- Proven methods and products

29
Q

Existing Franchise infrastucture

A
  • Established location

- Existing employees and customers

30
Q

Existing Franchise Disadvantages

A 
Tangible limitations;
- Design problems
- Location problems
- Merchandise problems
Intangible Limitations;
-Customer or Employee ill-will
-Pricing problems
-Inadequate procedures 
-Lease problems
-Potentially higher cost
-Legal Liability
31
Q

Master Franchise

A

A person who assumes the rights and obligations of the franchisor in a defined tertory

32
Q

Properties of Master Franchise

A

Receives franchise fees and royalties from dedicated areas

Percentage split of fees and royalties between franchisor and master…

33
Q

Advantages of Franchising

A

Going into business for yourself but not by yourself
Provides an established product or service which already enjoys widespread brand name recognition
Benefits of customer awareness which would ordinarily take years to establish

34
Q

5 Disadvantages of Franchising

A
  • Not completely independent
  • Operate according to procedures and restrictions
  • Ongoing royalties and advertising fees
  • Duration of the franchise agreement is limited.
  • Legal language is hard
35
Q

Three different franchises

A

Product Distribution
Business Format Franchise
Management Franchise

Business GR10 June And November Exam (7 decks)

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