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Business > Topic 10 Forms Of Ownership > Flashcards

Topic 10 Forms Of Ownership Flashcards

1
Q

Forms of ownership

A

Sole trader
Partnership
Private company
Personal liability company
Public company

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2
Q

Factors considered when choosing form of ownership

A

Start up coat and future capital.
Size and nature of the business.
Risk involved.
How capital will be contributed.
How profits and losses will be shared

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3
Q

Forms of ownership meaning

A

Legal position of the business and they way its owned

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4
Q

Profit companies
Differences

A

Company is formed with one aim of making profit.
An company incorporated for financial gain for its shareholders.

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5
Q

Non profit companies
Differences

A

An association incorporated not for gain.
Not required to pay taxes on next income.

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6
Q

Profit
Classification

A

Public companies : reflected as Ltd or limited
State owned companies : reflected as SOC ltd

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7
Q

Non profit
Classification

A

Non profit companies : reflected as NPC

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8
Q

Sole trader defenition

A

Business owned and managed by one person.

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9
Q

Characteristics of sole trader

A

Owner has unlimited liability.
Business dissolves when owner dies.
The owner has a personal Interest in the management and services rendered.

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10
Q

Advantages of sole trader

A

Owner can take steps to eliminate wastage of any kind.
All assets of the business belong to the owner personally.
The owner takes all profits made by the business and is entitled to ownership of assets.
Easy and quick to form a sole trade as there is less capital needed.

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11
Q

Disadvantages of sole traders

A

Cannot expand the business operations because of limited capital.
The owner has unlimited liability for debts of the business.
Lacks continuity especially in the event of death or illness.

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12
Q

Sole trader hand

A
  1. 1 owner
  2. No legal processes and requirements / trading license.
  3. Unlimited liability
  4. No continuity
  5. Not a legal entity.
  6. Any name
  7. Owner pays income tax in personal capacity.
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13
Q

Sole trader capital

A

Owned or borrowed capital

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14
Q

Sole trader managed ? And profits

A

By owners ot manager can be appointed. All profits to owner.

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15
Q

Partnership defenition

A

Arrangement where parties known as business partners agree to form a business for mutual intrest.

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16
Q

Partnership Characteristics

A

No legal requirements regarding name of the business.
Partners share profitsnmade and therefore work harder.
Partnership has no legal personality and therefore has no continuity.

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17
Q

Advantages of partnerships

A

All partners have personal intrest in the business.
Partners share profits made and they sre therefore motivated to work harder.
Partners can invest new capitals into the business yo finance expansion.

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18
Q

Disadvantages of partnership

A

Partners might still find it difficult to raise capital and not all partners contribute cash.
Partners are jointly and severally liable for the actions of other partners.
In large partnership he partners may struggle to agree on business issues.

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19
Q

Partnership hand

A
  1. 2 - unlimited partners
  2. Written partnership agreement
  3. Unlimited liability
  4. No continuity.
  5. Business not a legal entity
  6. No restriction usually ends in plural
    6.partners taxed in personal capacity
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20
Q

Partnership manager and profits

A

Partner / partners appoint a manager.
Profits ÷ according to Partnership agreement.

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21
Q

Partnership capital

A

Contribute own or borrowed capital
Money , labour’s, skills

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22
Q

Sole trader
Differences

A

Profit goes to owner.
Individual who owns a business entirely by him / herself.

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23
Q

Partnership
Differences

A

Comprises 2 or more people trending to make a profit.
Profit shared amongst partners according to partnership agreement.

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24
Q

Private company

A

It’s a company whose shares may not be offered to public for sale.

25
Q

Characteristics of private company

A

Liability of shareholders is limited to the number of shares held by them.
Raises capital by issuing shares privately to its shareholders.
Name of a private company must end woth the words.

26
Q

Advantages of private company

A

A company can continue to trade even if one shareholder dies / resigns.
Shareholders must agree to sale of transfer of shares.
Not required to file annual financial statements woth commission

27
Q

Disadvantages of private company

A

Difficult and expensive to establish as the company subjected to many legal requirements.
Directors sometimes act in their own interest not in the company’s best intrest.
Cannot be listed on the stock exchange therefore it cannot sell shares to the public.

28
Q

Private company
Hand

A
  1. 1 - unlimited share holders
  2. Registered with CIPC only document needed in memo of incorporation.
  3. Shareholders have limited liability.
  4. Has continuity unless liquidated
  5. Business is a separate legal entity.
  6. Ends in property limited or pay Ltd..
  7. company tax and shareholders pay tax on dividends
29
Q

Private company
Managers and profit ?

A

Managed by board of directors minimum 1 director.
Dividens shared according to no. Of shares held.

30
Q

Private company
Capital

A

Capital is raised by selling shares not to public . Aquire more shareholders to expand.

31
Q

Personal liability defenition

A

Mainly used by associations such as lawyers and accountants

32
Q

Characteristics of personal liability company

A

Required to have a minimum of one director on the board of directors.
Memo of Inc can be altered to require more than one director on board.
The memo of Inc should state that it’s a personal liability company.

33
Q

Advantages of personal liability

A

Same as private company

34
Q

Disadvantages of personal liability company

A

Same as private

35
Q

Personal liability company hands

A
  1. Min 1 founding member.
  2. Registered with CIPC . Only document needed is memo of Inc
    2.directors and past directors are jointlyand severally liable for debts
  3. Has continuity unless liquidated
  4. Business is a separate legal entity
  5. Ends in Inc
  6. Company tax
36
Q

Personal liability company
Managers and profits

A

Managed by board of directors: minimum 1 directors on the board.

37
Q

Personal liability company

A

Dividends according to no. Of shares held. Capital attract more shareholders

38
Q

Public company definition

A

Company registered to offer shares and stocks to general public.

39
Q

Public company characteristics

A

A minimum of 1 person is required to start a public company.
Company name ends with the letters Ltd.
Has separate legal personality.

40
Q

Public company advantages

A

Shareholders can sell / transfer their flies easily .
Directors bring creative ideas which In courage innovation / high productivity.
Managed at least 3 competent highly skilled directors.

41
Q

Disadvantages of public company

A

They must prepare their financial reports in accordance with the generally accepted accounting principals.
Vulnerable to increased scrutiny from the government and public .
Auditing of financial statements compulsory

42
Q

Private company
Differences

A

Minimum 1 director.
Shares not freely transferable.
Annual financial statements need not be audited and published.
Must end with ( pty ) Ltd

43
Q

Public company
Differences

A

Shares freely transferable.
Minimum of 3 directors
Must end with Ltd.
Annual financial statements need to be audited and published.

44
Q

Public company hands

A
  1. Min 3 - unlimited shareholders
  2. Registered with CIPC . ONLY document needed meo of Inc.
  3. Share holders have limited liability.
  4. Has no continuity unless liquidated .
  5. Business is a legal entity.
  6. Ends in Ltd
  7. Company tax and shareholders pay tax on dividends.
45
Q

Public company
Managed and profits

A

Min 3 directors
Dividends according to the no. Of shares held.

46
Q

Public company

A

Capital is raised by setting shares ok Public to aquire more shareholders.

47
Q

State owned company SOC

A

Gov is a major shareholder and it falls under the department of public enterprise

48
Q

Characteristics

A

Listed at as a public company.
Name ends with the letters SOC
financed by the government

49
Q

Advantages of SOC

A

Jobs are created for all skill levels
Wasteful duplication of service limited.
Shareholders have limited liability.

50
Q

Disadvantages

A

Losses must be covered by taxpayers.
Gov can lose money if business fails.
Shares are not freely tradable making it difficult to raise capital.

51
Q

Non profit company NPC definition

A

Legal entity organised and operated for collective public or social benefit

52
Q

Characteristics of NPCs

A

Funded by donations and foreign funding.
Name of company must end in npc.
Main aim is to provide a service and not to make profit

53
Q

Advantages of NPCs

A

Can receive grants / aid from the government.
A surplus of income is retained to further goals of the business.
Profits used solely for primary objective of the organization

54
Q

Disadvantage of NPCs

A

Creating and NPC take / effort / money.
Does not generate enough capital to cover their expenses.
Need professional assistance to set up the organization

55
Q

Co operatives definition

A

A traditional way for a group of interested parties to get together and share resources infrastructures and costs to achieve a better outcome

56
Q

Types of co operatives

A

Worker
Housing
Social

57
Q

Characteristics of co operatives

A

Motivated by service rather than profit.
Managed by a minimum of 3 directors.
Have a democratic structure which each member having one vote

58
Q

Advantages of co operatives

A

Access to resources and funding
Decision making is done by a group.
Members have limited liability

59
Q

Disadvantages of co operatives

A

Difficult to grow a co operatives.
Shares are not freely transferable
Very few promotion positions for staff.

Business (22 decks)

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