4) State-owned company | NPC's | Co-operatives

• Characteristics of a state-owned company

  • The name ends with the letters/ abbreviation SOC.
  • State-owned companies are listed as public companies.
  • It is owned by the government and operated for profit.
• Impact of state-owned companies

  Positives

  • SOCs can create jobs for all skill levels.
  • Wasteful duplication of services is eliminated.
  • Planning can be coordinated through central control.
• Impact of state-owned companies

  Negatives

  • It often relies on government subsidies.
  • Government can lose money through the business.
  • Losses must be met by the taxpayer.
• Characteristics of non-profit companies

  • They are funded by donation and foreign funding.
  • Qualifying NPCs are granted tax-exempt status.
  • Main aim of NPCs are to provide service and not to make a profit.
• Impact of non-profit companies

  Positives

  • NPCs have continuity of existence.
  • The liability of the members is limited.
  • If they qualify, NPCs can receive grants.
• Impact of non-profit companies

  Negatives

  • They need professional assistance to set up this organisation.
  • They are not allowed to pay bonuses to members.
  • Obtaining grants can be slow and tiring process.
• Criteria that contribute to the success and/ or failure of a non-profit company

  Taxation

  Success

  • May qualify for tax exemption if certain criteria are met.

  Failure

  • Required to pay income tax if engaged in activates that are unrelated to their business purpose.
• Criteria that contribute to the success and/ or failure of a non-profit company

  Management

  Success

  • An NPC may be well managed as it requires a minimum of three directors.
  • The legally prescribed management structure ensures a well-organised company.

  Failure

  • Directors may not have the skills to manage resources.
  • Large management structures can delay decisions.
• Criteria that contribute to the success and/ or failure of a non-profit company

  Capital

  Success

  • An unlimited number of founders may contribute more capital to the company.
  • More capital can be raised through donations or sponsorships for the operation and expansion.

  Failure

  • Founders may contribute limited capital, which may not sufficient for the establishment and operation of the company.
• Criteria that contribute to the success and/ or failure of a non-profit company

  Division of profits

  Success

  • The profits of the company are used to finance other needs of the company.

  Failure

  • May discourage potential investors from investing in the company as this is a non-profit company.
• Criteria that contribute to the success and/ or failure of a non-profit company

  Legislation

  Success

  • Financial statements are audited which may result in the effective use of resources.

  Failure

  • Formation procedures are time-consuming, complicated and expensive, as many legal documents need to be prepared and submitted.
• Characteristics of co-operatives

  • They are managed by a minimum of three directors.
  • Co-operative is motivated by service rather than profit.
  • It is a legal entity and can own land and open bank accounts.
• Impact of co-operatives

  Positives

  • Formation of co-operatives is easier than companies.
  • A co-operative can appoint its management.
  • Co-operatives are managed democratically because each member has one vote.
• Impact of co-operatives

  Negatives

  • The funds of a co-op are limited.
  • Financial statements must be audited.
  • The shares are not freely transferable.
• Criteria that contribute to the success and/ or failure of Co-operatives

  Taxation

  Success

  • Dividends declared by a company to a co-operative will be exempted from dividend tax.

  Failure

  • Co-operatives are taxed at the same rate as companies which may be high.
• Criteria that contribute to the success and/ or failure of Co-operatives

  Management

  Success

  • All members have one vote each and decisions are made democratically.

  Failure

  • Decisions are often difficult to reach.
• Criteria that contribute to the success and/ or failure of Co-operatives

  Capital

  Success

  • Raises its capital by issuing shares to members.

  Failure

  • The funds of co-operatives are limited and therefore it is difficult to grow.
• Criteria that contribute to the success and/ or failure of Co-operatives

  Division of profits

  Success

  • Each members has an equal share in the co-op.

  Failure

  • The co-operatives is motivated by service rather than profit, which means less profit for members.
• Criteria that contribute to the success and/ or failure of Co-operatives

  Legislation

  Success

  • Formation of co-operatives is easier than companies.

  Failure

  • The process of formations is timeous and difficult.