1) Criteria to evaluate success/failure of forms ofownership

• Key concepts

  • Form of ownership - refers to the legal position of the business and they way it is owned.
  • Annual General Meeting - a meeting of the shareholders of a company, held once a year, where directors give a report stating how well the company has done. Shareholders with voting rights can vote on issues of the company.
• Key concepts

  • Continuity - refers to the ability of the business to exist even if a change of ownership takes place.
  • Partnership agreement - a document that contains the information of the agreement between the partners on aspects like finances, division of work, sharing of profits, etc.
• Key concepts

  • Legal personality/ entity - the company does not exist physically as a person, but acts as a legal person who can conclude a contract, sue a person, and can be sued.
  • Audit - the process that exists to examine and verify the financial accounts of the business.
• Key concepts

  • Directors - people elected to the board of a company by the shareholders to represent the shareholders interests.
  • Shares - allows investors to obtain part ownership of a company.
• Meaning of limited liability and unlimited liability

  • Limited liability - losses are limited to the amount that the owner invested in the business.
  • Unlimited liability - the owner's personal assets may be seized to pay for the debts of the business.
• Meaning of limited liability and unlimited liability

  Limited liability

  • Losses are limited to the amount that the owner invested in the business.
  • The owner's personal assets are protected against the debts of the business.
• Meaning of limited liability and unlimited liability

  Unlimited liability

  • The liability of the owners to pay debts/ claims is not limited to the business only.
  • The owner's personal assets may be seized to pay for the debts of the business.
• Criteria that will be used to evaluate the success and/ or failure of forms of ownership

  Tax implications

  • Refers to the rate at which the form of ownership is taxed, the frequency of tax payments and its influence on the success/ failure of the business.
• Criteria that will be used to evaluate the success and/ or failure of forms of ownership

  Management

  • The way in which decisions are made and how many persons are part of management.
  • The influence of decision-making on the success/ failure of the business.
• Criteria that will be used to evaluate the success and/ or failure of forms of ownership

  Capital

  • Refers to how easy/ difficult it is for a form of ownership to acquire capital and its influence on the success/ failure of the business.
• Criteria that will be used to evaluate the success and/ or failure of forms of ownership

  Division of profit

  • Refers to amongst how many people profits are to be divided and its influence on the success/ failure of the business.
• Criteria that will be used to evaluate the success and/ or failure of forms of ownership

  Legislation/ Legal requirements

  • Consider legal requirements businesses are subjected to, requirements before a business can start and whether the business is a legal entity or not.
• Ask yourself the following questions:

  Taxation:

  • Who will be taxed?
  • What is the tax rate?
  • How does the tax rate compare with other forms of ownership?

  Management:

  • Who will manage this form of ownership?
  • Will the managers be able to make good decisions?
  • Will the managers contribute to the success/ failure of the business?
• Ask yourself the following questions:

  Capital:

  • What form of capital will be obtained?
  • What amount of capital could be raised?
  • Can the business raise extra capital for expansion?

  Division of profits:

  • How will profit be distributed?
  • Who will receive the profit of the business?
  • Will profits encourage owners/ managers to work hard?
• Ask yourself the following questions:

  Legislation/ Legal requirements:

  • Will legislation contribute to the success/ failure of the business?
  • What is the legal restrictions on the business with formation?
  • Will legislation restrict/ motivate owners/ shareholders to join the business?