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Business > Forms of Ownership > Flashcards

Forms of Ownership Flashcards

1
Q

Provide the definition of Forms of Ownership.

A

Legal position of a business and the way it’s owned.

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2
Q

What is an MOI?

A

The Memorandum of Incorporation is a document that sets out the rights, duties and responsibilities of shareholders, directors and others.

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3
Q

What is a Prospectus?

A

Document inviting the public to buy shares.

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4
Q

What is an AGM?

A

An Annual General Meeting is held once a year where the shareholders receive a report stating how well or poorly the company has done.

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5
Q

What is an Audit?

A

Process where financial statements of the business are checked to conform that they’re correct.

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6
Q

List 4 factors that need to be considered when choosing a form of ownership.

A
  • tax implications
  • risk involved
  • size and nature of business
  • how capital will be contributed
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7
Q

What is a Sole Trader?

A

Owned and managed by one person. Owner is responsible for all activities and decisions of business.

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8
Q

List 4 characteristics of a Sole trader.

A
  • Unlimited liability
  • No continuity
  • No legal requirements regarding name of business
  • 1 member
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9
Q

Give 3 advantages of a Sole trader

A
  • Quick decisions
  • Owner takes all profit
  • Easy and quick to form
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10
Q

Give 3 disadvantages of a Sole trader.

A
  • Can’t expand
  • Lacks continuity
  • Unlimited liability
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11
Q

What is a Partnership?

A

Arrangement where parties,business partners, agree to form a business for their mutual interest. Partners share responsibility.

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12
Q

List 4 characteristics of a Partnership.

A
  • Unlimited liability
  • No continuity
  • No legal requirements regarding name.
  • Minimum of two people
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13
Q

Give 3 advantages of a Partnership.

A
  • Partners share profit
  • Partners have personal interest in business
  • Workload and responsibility is shared.
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14
Q

Give 3 disadvantages of a Partnership.

A
  • Slow-decision making
  • Unlimited liability
  • Difficult to raise capital
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15
Q

What is a Close Corporation?

A

A legal entity with a legal personality. Owned by members and there’s between 1-10 of them.

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16
Q

List 4 characteristics of a Close Corporation.

A
  • Limited liability
  • Unlimited continuity
  • Name must end with CC.
  • Minimum of 1 and maximum of 10 members
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17
Q

Give 3 advantages of a Close Corporation

A
  • Unlimited continuity
  • Limited liability
  • Fewer legal requirements
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18
Q

Give 3 disadvantages of a Close Corporation.

A
  • Limited growth and expansion
  • Double taxasion
  • Can’t sell a CC
19
Q

What is a Private Company?

A

Shares may not be offered to to public. Has to register as a taxpayer.

20
Q

List 4 characteristics of a Private Company.

A
  • Limited liability
  • Unlimited continuity
  • Name must end with (Pty) Ltd
  • Unlimited number of shareholders
21
Q

Give 3 advantages of a Private Company.

A
  • Unlimited continuity
  • Limited liability
  • Info is only available to shareholders
22
Q

Give 3 disadvantages of a Private Company.

A
  • Slow decision-making
  • Difficult and expensive to establish
  • Can’t sell shares to public.
23
Q

What is a Personal Liability Company?

A

Mainly used by associations such as lawyers and accountants.

24
Q

List 4 characteristics of a Personal Liability Company.

A
  • Unlimited liability
  • Unlimited continuity
  • Name ends in INC.
  • Minimum of 1 director
25
Q

Give 3 advantages of a Personal Liability company.

A
  • Unlimited continuity
  • Info is only available to shareholders
  • Shareholders must agree to sale of shares.
26
Q

Give 3 disadvantages of a Personal Liability Comapny.

A
  • Unlimited liability
  • Slow decision-making
  • Can’t sell shares to public
27
Q

What is a Public Company?

A

Registered to offer shares and stock to public. Trades in the JSE.

28
Q

List 4 characteristics of a Public Company?

A
  • Limited liability
  • Unlimited continuity
  • Name ends in Ltd.
  • Minimum of 1 person
29
Q

Give 3 advantages of a Public Company.

A
  • Limited liability
  • Growth is not limited
  • Directors bring creative ideas
30
Q

Give 3 disadvantages of a Public Company.

A
  • Difficult and expensive to establish
  • Slow decision-making
  • Vulnerable to increased scrutiny from government and public.
31
Q

What is a State-Owned Company?

A

Government is a major shareholder, falls under the Department of Public Enterprise.

32
Q

List 4 characteristics of an SOC.

A
  • Limited liability
  • Financed by government
  • Name ends with SOC
  • Listed as a Public company
33
Q

Give 3 advantages of an SOC.

A
  • Limited liability
  • Jobs are created for all skill levels
  • Helps eliminate economic exploitation and oppression
34
Q

Give 3 disadvantages of an SOC.

A
  • Inefficiencies in management
  • Losses covered by taxpayers
  • Government can lose money if business fails
35
Q

What is a Non-profit Company?

A

Legal entity organised and operated for a collective, public or social benefit. Aim is to benefit the public.

36
Q

List 4 characteristics of an NPC.

A
  • Limited liability
  • Unlimited continuity
  • Name ends in NPC.
  • Funded by donations and foreign funding
37
Q

Give 3 advantages of an NPC.

A
  • Doesn’t pay tax
  • Can receive grants from government
  • Not compelled to an AGM
38
Q

Give 3 disadvantages of an NPC.

A
  • Takes time/effort/money
  • Doesn’t generate enough capital
  • Can’t give bonuses to members
39
Q

What is a Co-operative?

A

Voluntary association tht’s established with the aim of service to it’s members. People with similar interests link for promotion of common goals.

40
Q

List 4 types of Co-operatives.

A
  • Housing Co-operative
  • Social Co-operative
  • Worker Co-operative
  • Transport Co-operative
41
Q

List 4 characteristics of Co-operatives.

A
  • Limited liability
  • Unlimited continuity
  • Name ends in ‘Co-operative Limited’
  • Minimum of 5 members
42
Q

Give 3 advantages of Co-operatives

A
  • Limited liability
  • Decisions are fair and democratic
  • Decision-making is done by a group
43
Q

Give 3 disadvantages of Co-operatives

A
  • Difficult to grow
  • Decisions are difficult and time-consuming
  • Shares aren’t freely transferable

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