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Business Studies > Forms Of Ownership > Flashcards

Forms Of Ownership Flashcards

1
Q

What are the characteristics of a Sole trader

A

Owned by one person
Contribute all capital
Not separate legal persona
Not a separate legal entity
No Continuity

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2
Q

What are the advantages of have a sole-trader as a form of ownership

A
  • Quick, no legal requirements and low cost to form
  • owner has capital requirements in own personal capacity
  • quick decision making
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3
Q

What are the disadvantages of have a Sole trader as a form of ownership

A
  • Owner carries all the risk
  • No continuity
  • Owner has unlimited liability
  • No different solutions to problems since there’s one owner
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4
Q

What are the characteristics of a Partnership

A
  • 2+ joint owners
  • share capital contributions, profits and losses
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5
Q

What are the Advantages of having a Partnership as a form of ownership

A
  • No legal requirements, quick & low costs. Partnership agreement.
  • More capital because more contributions
  • Better decision making and synergy through combination of skills and knowledge
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6
Q

What are the ways to enter a Partnership agreement

A
  • tactically (by implication)
  • verbally
  • in writing (safer)
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7
Q

What are the disadvantages of have a Partnership as a form of ownership

A
  • 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
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8
Q

What is a Company

A

A legal entity incorporated in terms of act 71 of 2008
- registered with the CIPC

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9
Q

What is the CIPC

A

The Companies and Intellectual Property Commission

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10
Q

Give three purposes of the companies act

A
  • encourages entrepreneurship
  • Promotes well-being of the economy
  • Simplifies the process of registering and managing a company
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11
Q

Give the type of comanies

A

Profit companies
Non-profit companies

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12
Q

Gives the types of Profit companies

A

State owned Co
Private owned Co
Personal Liability Co
Public Co

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13
Q

Private company

A
  • Memorandum of Incorporation must specify that no shares are offered to the public
  • Shares are not freely negotiable or transferable
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14
Q

Public company

A

Listed in the JSE
Offers shares to the general public to raise capital

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15
Q

The Director

A
  • knows about the industry
  • Makes day to day decisions
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16
Q

Shareholder

A
  • May not have experience in the industry
  • own equities
17
Q

Stakeholders

A

Have interests in the company

18
Q

Names of companies according to the Act

A
  • mustn’t be similar to existing one
  • mustn’t be hateful
  • must not be misleading
19
Q

The Formation procedures of Companies

A

-pay fee
- complete notice of incorporation
- register memorandum of incorporation

20
Q

The prospectus of Companies

A
  • written invitation to buy shares to the public
  • must be signed by all directors
21
Q

Meetings held by companies

A
  • can attend by proxy- 1 year
  • 15 days pre
  • 25% of shares with voting rights
22
Q

Duties of directors in Companies

A
  • Fiduciary duty to act in the best interests of the company
  • obligated to disclose personal things
23
Q

Solvency test

A

Ensure assets exceed liabilities

24
Q

Liquidity test

A

Determine that the company is in the financial position to settle its debts that will become due in the next 12 months

25
Q

What are the Advantages of Companies

A
  • Business is legal entity
  • There is continuity of existence
  • limited liability ( only lose capital investment if businesses is insolvent)
26
Q

What are the Disadvantages of Companies as form of ownership

A
  • Costly and complicated formation procedure
  • cost factor R4500+
  • pay 28% tax no matter the profit
27
Q

Number of owners in a Partnership

A

2- 20

28
Q

Number of owners in a Company

A

1- Unlimited

29
Q

The names of Companies

A

Private Co- (PTY) LTD
Public Co- LTD

Business Studies (12 decks)

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