TERM 1 Topic 1.6 - Benefit of a company over other forms of ownership

Question 1

Benefits & Challenges between the following:

Company vs a Sole Trader (Sole Proprietor)

Answer 1

BENEFITS of a company
- better chance of growth
- no limit to number of owners
- limited liability
- more opportunities to pay less tax

CHALLENGES of a company
- needs more capital
- needs more documents to register
- cannot give all profits to owner

Question 2

Benefits & Challenges between the following:

Company vs a Partnership

Answer 2

BENEFITS of a company:
- capital is not limited by partners
- not limited in its growth
- no limit to the number of owners
- limited liability
- more opportunities to pay less tax

CHALLENGES of a company:
- restrictions on its name
- needs more than a single agreement to register
- cannot share all profits between partners

Question 3

Benefits & Challenges between the following:

Company vs a Close Corporation

Answer 3

BENEFITS of a company:
- does not have its capital limited by members
- not limited in its growth
- no limit in number of owners
- limited liability
- has the same opportunities to pay less tax

CHALLENGES of a company
- has the same name restrictions
- needs more documents to register
- cannot share all profits among members

Question 4

Benefits & Challenges between the following:

Company vs a co-operative

Answer 4

BENEFITS of a company
- same good growth potential
- same unlimited number of owners
- can take profits and pay it out
- has the same limited liability
- has the same opportunities to pay less tax

CHALLENGES of a company
- costs more to set-up
- has restrictions on its name

Question 5

What should be included in a PROSPECTUS?

Answer 5

• summary of company’s vision and goals
• description of the main business function
• outline of the management structure
• outline of the marketing plans
• outline of the financial statements
  (past, present, future)
• a SWOT analysis giving risks and showing why
  investment is good

SWOT = Strengths
Weaknesses
Opportunities
Threats

Question 6

What is a PROSPECTUS?

Answer 6

Document details all the info about a company to people who might be interested in buying shares