This document contains summaries made from " Consumo business studies textbook" which summarizes the forms of ownership in a business; e.g., sole trader, companies, partnership.
Chapter 5
Forms of ownership:
Formation procedure > Refers to the fact that some businesses have to be registered.
Legal persona > means the business becomes a separate legal person from the owner.
Management and control aspects > this is where the law does not specify who has to manage the business.
Tax implications > if it is the business that is the legal entity, the business will be labile to pay income tax.
*Capital requirements of the business will probably be determined by the base -sized and nature of the business. *
Sole trade:
Definition of a sole trader >
- It is a business that is started and owned by one person and does not register the business as a
separate legal entity.
Characteristics of a sole trade:
1. Formation procedure
2. Legal persona
3. Continuity of existence
4. Owners’ liability for debts
5. Tax implications
6. Capital requirements
7. Management and control aspects usually handled by the owner.
Advantages & disadvantages of a sole trade:
Advantages: Disadvantages:
Characteristics:
Formation procedures No legal requirements – quick - NADA -
& low cost.
Legal persona - NADA - Owners carries all the risk.
Continuity of existence - NADA - No continuity.
Owners’ liability for debts - NADA - Has unlimited liability.
Tax implications If profit is low, rate at which If profit is high, rate at which
taxed could be lower than 28% taxed will be higher than 28%.
Capital requirements If business does not require If business needs more capitals
lots of capital , owner is that owner can offer, owner
capable of raising capital in must consider different form
their own personal capacity. of ownership.
Management and control Owner can make quick Bouncing off ideas or
decisions. discussion of problems will not
occur as owner manages the
business alone.
, Partnership:
Definition of a partnership >
- A business where two or more people become joint owners of the business. Business not
registered as a legal entity separate from the owners.
Characteristics of a partnership:
1. Formation procedure
2. Legal persona
3. Continuity of existence
4. Owners’ liability for debts
5. Tax implications
6. Capital requirements
7. Management and control aspects usually handled by the owner.
Advantages & disadvantages of a partnership:
Characteristics: Advantages: Disadvantages:
Formation procedure No legal requirements- quick & No partnership agreement in
low cost. writing can cause issues.
Legal persona - NADA - Owners carries all the risk.
Continuity of existence - NADA - Has no continuity.
Owner’s liability for debts - NADA - Have unlimited liability.
Tax implications If profit is low, tax charged will If profit is high, tax charged
be lower. will be higher.
Capital requirements Possible to raise capital due to - NADA -
there being more people.
Management and control Quality of decision making is Slower decision – making.
better than that of a sole
trader.
What is a partnership agreement?
- It is an agreement that defines the terms and conditions agreed upon by the partners and
may be entered into:
➢ Tacitly {by implication.}
➢ Verbally.
➢ In writing.
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 kayleevandyk. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $4.72. You're not tied to anything after your purchase.
