Class notes
Business enterprise: business entities
- Course
- Institution
Study notes on business entities
[Show more]
Seller
Follow
gontsemichelle
Content preview
lOMoARcPSD|10435457BUS ENTERPRISE LAW/ BUSINESS ENTITIES
Business Enterprise Law (University of the Witwatersrand, Johannesburg)
Studocu is not sponsored or endorsed by any college or university
Downloaded by Gontse Michelle (gontsemichelle5@gmail.com)
, lOMoARcPSD|10435457
BUSINESS ENITITIES
BUSINESS STRUCTURES
In South African law there are 5 types of business organisations/ structures
Types of business structures include:
Sole trader/proprietorship
Partnership
Company
Close corporation
Business trust
Factors that must be considered when choosing a type of business structure include:
Who bears the risk?
How is capital raised?
What is the management structure?
Who exercises control?
Will there be perpetual succession?
Is there space for growth and expansion?
Taxation liability
Legal and administrative formalities and costs
THE SOLE TRADER/ PROPRIETERSHIP
Are the single legal owners of their business
They exercise complete control
They provide their own capital and bear all the legal responsibility for their business
They share profits alone and are liable for all losses alone
Are personally liable for debts incurred by the business
Due to there being no limited liability for sole traders, there is no difference drawn between
their personal asset and their business assets, therefore personal assets can be used to pay
off business debts
Depending on the type of business conducted, no registration may be required
DISADVANTAGES: - Personal liability for debts of the business
- Limited expansion of growth due to limited capital
Downloaded by Gontse Michelle (gontsemichelle5@gmail.com)
, lOMoARcPSD|10435457
- Lack of legal continuity
- Increased tax liability
Financial statements are not audited
THE PARTNERSHIP
An association formed with the intention to make a profit
A partnership is a business structure aimed at making and sharing profits
Cannot be formed with the objective of being a charity/ non- profit
Partnership is formed through a partnership agreement which may be in writing, orally
discussed or tacitly implied through conduct
Consists of a minimum of two partners and a maximum of twenty partners
All partners must participate in the management of the business and each get a share of the
net profit of the business
Partners are jointly owners of the assets of the partnership
Immoveable property must be registered in the names of the partners
Partnership liabilities are liabilities of the individual partners
Partners are thus jointly, severally and ultimately liable for all debts and
liabilities of the partnership
Partners share net profits according to proportions agreed upon in the partnership
agreement, be it equally or based on contribution
If no proportion agreement, profits are shared according to the value of each
partners contribution
If this is not possible due to one partner having contributed skill or labour,
then profits are shared equally
DISADVANTAGES: - Does not have perpetual succession
- Automatic dissolution of the partnership occurs when one partner
decides to exit partnership, death, insolvency or retirement and
results in the need for creating a new partnership
- Legal continuity is disrupted by the entry or exit of any partner
- Partnerships not subject to income tax
Financial statements not audited
Downloaded by Gontse Michelle (gontsemichelle5@gmail.com)
, lOMoARcPSD|10435457
THE COMPANY
Is a structure that is endorsed by law with the capacity to acquire legal rights and be subject
to legal duties
PUBLIC COMPANY: formed to raise large sums of money from the public in return for shares
issued to them that are transferable
PRIVATE COMPANY: formed where shareholders contribute their own funds to the capital of
the company in return for shares that are not transferrable
Has a separate legal personality from the members who compose it
The company is the legal owner of itself, property and assets bought in its name and not the
shareholders or members as it is a separate legal person
CASE: Dadoo Ltd v Krugersdorp Municipality Council
Court found that even if there is a one-man company, all property and assets would
belong to the company and not to the one-man.
All property bought for the company is registered in the company’s name and all profits
belong to the company
Debts and liabilities also belong to the company and not to separate share holders
A company can sue and be sued in its own name
ADVANTAGES: -Has limited liability, therefore creditors can claim debts from the company
only
-Have perpetual succession= enables shareholders to sell their shares
without affecting legal existence of company
-Have legal continuity= can exist even if members or shareholders change
-Growth and expansion viable
-Formation of a public company requires just one shareholder
-Can be formed with the objective of being a non-profit
DISADVANTAGES: -Compliance with legal formalities for the registration of a company
-Company must be registered with the Companies and Intellectual
---Property Commission
Downloaded by Gontse Michelle (gontsemichelle5@gmail.com)
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller gontsemichelle. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $14.35. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
70055 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now