Forms Of Ownership Flashcards
What are the characteristics of a Sole trader
Owned by one person
Contribute all capital
Not separate legal persona
Not a separate legal entity
No Continuity
What are the advantages of have a sole-trader as a form of ownership
- Quick, no legal requirements and low cost to form
- owner has capital requirements in own personal capacity
- quick decision making
What are the disadvantages of have a Sole trader as a form of ownership
- Owner carries all the risk
- No continuity
- Owner has unlimited liability
- No different solutions to problems since there’s one owner
What are the characteristics of a Partnership
- 2+ joint owners
- share capital contributions, profits and losses
What are the Advantages of having a Partnership as a form of ownership
- No legal requirements, quick & low costs. Partnership agreement.
- More capital because more contributions
- Better decision making and synergy through combination of skills and knowledge
What are the ways to enter a Partnership agreement
- tactically (by implication)
- verbally
- in writing (safer)
What are the disadvantages of have a Partnership as a form of ownership
- If there’s no partnership agreement, then there will be complications in court.
- Owners carry all the risk
- Owners are legal entities
- no continuation ( new agreement must be formed)
-Unlimited Liability - Jointly & severally liable for debts
- Longer and slower decision making
What is a Company
A legal entity incorporated in terms of act 71 of 2008
- registered with the CIPC
What is the CIPC
The Companies and Intellectual Property Commission
Give three purposes of the companies act
- encourages entrepreneurship
- Promotes well-being of the economy
- Simplifies the process of registering and managing a company
Give the type of comanies
Profit companies
Non-profit companies
Gives the types of Profit companies
State owned Co
Private owned Co
Personal Liability Co
Public Co
Private company
- Memorandum of Incorporation must specify that no shares are offered to the public
- Shares are not freely negotiable or transferable
Public company
Listed in the JSE
Offers shares to the general public to raise capital
The Director
- knows about the industry
- Makes day to day decisions
Shareholder
- May not have experience in the industry
- own equities
Stakeholders
Have interests in the company
Names of companies according to the Act
- mustn’t be similar to existing one
- mustn’t be hateful
- must not be misleading
The Formation procedures of Companies
-pay fee
- complete notice of incorporation
- register memorandum of incorporation
The prospectus of Companies
- written invitation to buy shares to the public
- must be signed by all directors
Meetings held by companies
- can attend by proxy- 1 year
- 15 days pre
- 25% of shares with voting rights
Duties of directors in Companies
- Fiduciary duty to act in the best interests of the company
- obligated to disclose personal things
Solvency test
Ensure assets exceed liabilities
Liquidity test
Determine that the company is in the financial position to settle its debts that will become due in the next 12 months
What are the Advantages of Companies
- Business is legal entity
- There is continuity of existence
- limited liability ( only lose capital investment if businesses is insolvent)
What are the Disadvantages of Companies as form of ownership
- Costly and complicated formation procedure
- cost factor R4500+
- pay 28% tax no matter the profit
Number of owners in a Partnership
2- 20
Number of owners in a Company
1- Unlimited
The names of Companies
Private Co- (PTY) LTD
Public Co- LTD
