forms of ownership Flashcards
memorizing
def: business
business is the organized effort of individuals to produce and sell, for profit, the goods and services that satisfy society’s needs.
forms of ownerships
sole proprietorship
partnership
private and public company
personal liability company
not for profit company
joint venture
syndicate
def: sole proprietorship
is a business that is owned and usually operated by one person
most of the advantages of a sole proprietorships arise from the two main characteristics, which are?
simplicity
individual control
advantages of sole proprietorship
ease of start up and closure
pride of ownership
no special taxes
retention of all profits
flexibility of being your own boss
disadvantages of a sole proprietorships
unlimited liability
lack of continuity
lack of money
limited management skills
difficulty in hiring employees
def: unlimited liability
a legal concept that hold a business owner personally responsible for all the debts of the business
def: legally incompetent
a person who is formally judged as being unfit or unable to manage their own financial or business affairs, after being assessed through medical and psychological procedures
points on partnership
*def: the relationship existing
between two or more
persons who join together to
carry out a trade, a business
or a profession’ (SARS)
*there is no legal maximum on the number of partners a
partnership may have, most have only two.
*a partnership often represents a pooling of special managerial skills and talents; at other times, it is the result of a sole proprietor taking on a partner for the purpose of obtaining more capital.
TYPES OF PARTNERS
*General partners
*Limited partners
def: general partner
A general partner is a person who assumes full or shared responsibility for
operating a business.
def: Limited partners
A limited partner is a person who invests money in a business but who
has no management responsibility or liability for losses beyond his or her
investment in the partnership.
THE PARTNERSHIP AGREEMENT
● who will make the final decisions
● what each partner’s duties will be
● the investment contribution that each partner will make
● how much profit or loss each partner receives or is responsible for
● what happens if a partner wants to dissolve the partnership or dies
● what should happen in terms of resolution in case a dispute arises
● the financial arrangements, such as banking and accounting arrangements
● how the business will be valued if the status of the partnership changes.
ADVANTAGES OF PARTNERSHIPS
Ease of start-up
Availability of capital and credit
Personal interest
Combined business skills and knowledge
Retention of profits
No special taxes
DISADVANTAGES OF PARTNERSHIPS
Unlimited liability
Management disagreements
Lack of continuity
Frozen investment
