Forms of Ownership Flashcards
What is formation procedures?
The more legal formalities involved in starting a business.
Why is it consuming to establish a business?
The more expensive, difficult and time-consuming
When does business obtain a legal persona?
When it is registered
What does legal personality offer?
The owner is limited liability because the business can sue and be sued in its own right
What do business is not risk when it is limited liability?
They don’t risk losing their personal possessions
When will the business have continuity of existence?
Evan has legal persona apart from the owners
What happens if there is continuity?
There Is a change in ownership which does not affect the existence of the business 
What does continuity of existence increase?
What tax system applies to South African?
The progressive tax system
What does the progressive tax system mean?
The higher the income the higher the tax percentage
How much percent tax is sold traders and partners taxed on their personal profits?
Maximum of 45%
When will a sole trader or partner be taxed more than a CC or company?
When they receive a substantial amount of profit
Who is responsible to pay tax in ACCO company?
The business
What is the fixed percentage of tax that applies to the company?
28%
What taxable shareholders pay?
A dividends tax
When our owners usually involved in the day-to-day management of a business?
Soul trader partnership and close cooperation
When is there a separation between ownership and management?
In a company shareholders delegate the management of the business to a board of directors
What will determine the amount of capital required?
The size of the business
What else impacts capital requirements?
The type of product to be manufactured and sold, all the service rendered
What does more owners mean?
More capital
How many owners are there in a sole trader?
One owner
Name the positive aspects of having one owner
• Make quick decisions – gives flexibility to adapt to changing conditions
• Lowering the risk of lost opportunities
• Owners will get all profits – more motivated to be successful 
What problems increase the chances of failure in a sole trader?
• Limits the expansion and growth – only person you can contribute
• Relies on their own initiative – no one to discuss important decisions or alternatives
• No want to take over if ill or on holiday – management problems 
How do you start a soul trading business?
No requirement of procedures to follow. Limit costs and increases the chances of success
What can’t a sole trader be registered as?
A business with a separate legal persona from the owner
What legal personality and liability does a sole trader have?
Unlimited liability for the debts of the business. Their personal belongings belongings can be lost if the business fails
What capacity does a sole trader pay tax?
Personal capacity on all profits taken from the business
What text system is used for a sole trader?
Progressive personal income tax
How does a sole trader make provision for tax?
Reducing the profits they can reinvest the business as capital and limit the potential for future growth
What is the continuity of existence of a sole trader?
No continuity of existence as there is no legal personality
How can I still trade to have continuity of existence?
If it is registered and told to someone else
How many numbers of owners are there in a partnership?
Minimum of two and no maximum
Why is the number of owners in a partnership good?
• More owners to contribute capital – business can grow and expand
• All partners actively involved in management – productivity can improve due to divisions of labour
• More than one person can decide on important issues – improve chances of success
• 
What is negative about a partnership?
All parties have to agree before decision can be taken – slow decision making leads to loss opportunities and low chances of success
What is the only formation procedure required for a partnership?
Partnership agreement or partnership articles
How can a partnership agreement be entered?
Verbally, in writing, tactic
Define the partnership agreement
A contract defining the terms and conditions as agreed upon by the partners
Why is the information of a partnership easy and cheap?
Lack of formal establishment procedure
Due to the formation of a partnership being cheap what is there more capital for?
To buy stock or equipment needed which improves the chances of success
How does forming a partnership eliminate competition?
Eliminate competition between smaller so traders
What does combining different skills of two so traders do?
Gives him a better competitive position and improves Chances of success
What is a partnership is registered as?
Cannot be registered as a business
With a separate legal persona from the owners
What legal personality and liability does a partnership have?
Unlimited liability and may motivate workers to work harder to be successful
What could Unlimited liability lead to any partnership? 
Partners are jointly and severally responsible. This could make them over conscious and opportunities could be lost
Does a partnership have continuity of existence?
No continuity of existence
When must a partnership dissolved?
When a partner dies, retires or a new partner joins
How is tax paid in a partnership?
Each
How many owners are there in a close corporation?
10 owners
Why would expansion be hard in a close corporation?
Large amount of capital needs to be raised
Why is capital Limited and expansion in a close corporation?
Another CCO company may not have interest
Who has to agree if a member wants to sell his interest?
All members have to agree
Who is active in the management of the business in a close corporation?
The members – very suitable form of ownership for small businesses where the owners are involved in daily management
What are the advantages of a close corporation?
• Members specialise in activity/management function – increase productivity
• More than one person decide – improve chances of success 
What are the disadvantages of a close corporation?
• All members agree before decision – slow decision-making and loss opportunities
• Chance of conflict increases – remove people involved 
Who does not ordered the financial statements of ACC?
Not to be audited by a chartered accountant
What does no auditing fees of a close corporation mean?
Lower costs – more capital to expand
Who has a sign of a statement? 
A member of SA IPA
What does SAIPA stand for?
South African Institute of professional accounts
What is a close corporation registered as?
A separate legal entity from the owners
What liability to members of a close corporation have?
Limited liability
When can a member of a close corporation lose the investments they made?
The business lands in a financial difficulties. Personal belongings are not at risk – more risks taken
What continuity of existence does a close corporation have?
Unlimited Continuity
When does Continuity end? CC
Members decided to discontinue business – liquidation or a result of court decision
What tax does a close corporation pay?
Business tax
What is the rate at which a close corporation pays tax?
Fixed percentage of 28%
What are the number of owners in a company?
Minimum of one and no maximum of shareholders
What is the maximum number of shareholders limited to? The number of shares available to be sold
What do the shareholders of a company not have directions are in? The management of the business
Who is management the responsibility of?
Board of directors who are appointed by shareholders at the annual general meeting
What is a shareholders voting rights determined by?
The type a number of shares that they have
Why do you not all shares have voting rights? Other benefits available such as hide evidence
What are the implications of shareholders voting for directors?
• Directors are kept accountable
• Shareholders have a say through the voting process 
What are the advantages of a company?
• Easier and faster decision-making and implementation
• More shareholder involvement
• Better relationships 
What are the disadvantages of a company?
• More interaction and discussion – delay decisions in total consensus
• Limited input or lack of variety in skills on the board 
Where are the shares of a public company freely negotiable?
On the JSELTD
What does JCLTD stand for?
The South African stock exchange
How do you obtain shares in a private company?
Bought by invitation from existing shareholders
How can I shareholder in a private company sell his shares?
Permission of all the other shareholders
