forms of ownership

• formation procedure: the more legal formalities involved the more expensive it will be to establish
• legal persona liability is when the business obtains a legal persona when its registered and has legal personalities. it offers owners limited liability because the business can sue and be sued in its own right.
• continuity of existence is when the business will have continuity if it has a legal persona. if there is continuity then there is a change in ownership and doesn't affect the existence of the business and increases the possibility of success for the business
• progressive tax systems are applied to individuals meaning the higher the income the more tax you have to pay (max is 45% min is 28%). usually, the owner of a sole trader and partners in a partnership are taxed from their income, they are taxed more than the CC and company
• sole trader, partnership, and CC are all involved in the day-to-day management of the business.

  shareholders delegate the management to the Board of directors meaning there is separation between ownership and management
• size of the business will determine the amount of capital required to start a business.
• sole trader:

  1. only one owner and can contribute to both success and failure of the business
  2. Ability to make quick decisions
  3. more motivated and know what they will get for their profit
  4. only one that contributes capital to start a business
  5. discuss important things to themselves have no one for advice
  6. cant have holidays due to not having anyone to look after business
• formation procedure for sole trader:

  1. no requirements to follow to establish a sole trader
• legal personality and liability of sole trader:

  1. not registered because of business has a separate legal persona from the owner therefore has unlimited liability for the debts of the business
• tax for sole trader:

  1. The higher the income the higher the percentage tax that has to be paid meaning the owner has the make provision for tax by reducing profits.
• continuity of existence:

  1. no continuity meaning no legal persona
• partnership: number of owners

  1. minimum 2 no maximum
  2. more than one person can decide important issues
  3. partners need to agree before taking the decision
  4. makes it easy for more people to contribute capital and expand the business
• formation procedure: partnership

  1. the partnership agreement is a contract that defines the terms and conditions agreed upon by partners
• continuity of existence: partnership

  1. business does not have a continuity of existence and the partnership usually dissolves when a partner retires or dies.
• tax: partnership

  1. partners pay personal tax
• legal personality and liabilities: partnership

  1. partners have unlimited liability and this can motivate partners to work hard
  2. not registered
• Close Corporations: number of owners

  1. 1-10
• tax: cc

  1. business pays tax
• managed: CC

  1. members no more than 2-3
• continuity: CC

  1. continues

  advantages:

  1. members can specialize activities
  2. more than one person can discuss important issues

  disadvantages:

  1. members need to agree before making decisions
  2. chances of conflict can increase
• legal personality and liability:

  1. members have limited liability
  2. only stand to lose the investment made in CC if business lands in financial difficulty
• companies private and public: number of owners}

  1. min but no max.
  2. max number is limited to the number of shares available
• management: companies

  1. Responsibility of Board of directors and appointed by AGM.
  2. directors are kept accountable
  3. shareholders have a say through voting process
• advantages: companies

  1. better relationship
  2. more shareholder involvement

  disadvantage:

  1. limited input
  2. more interaction and delay decisions in the pursuit of total consensus
• jointly: both liable for debts

  severely:  its own part of the loan.
• dividends: money paid out to shareholders from a company's profits