The notes above provide an incredibly detailed summary of the Forms of ownership section of the Business Studies syllabus of the IEB curriculum. The notes above have been used to complete the grade 11 year with a 91% on the final exam.
Forms of Ownership
Forms of ownership
Choosing a form of ownership
Formation procedures
The more legal formalities involved in starting a business, the more expensive, difficult
and time consuming it is to establish.
Legal persona and liability
When the business has a legal personality, it offers the owners limited liability (Owners
do not risk losing their personal assets).
Continuity of existence
A business only has continuity of existence if they have a legal persona apart from the
owner. If there is continuity of existence it means that a change in ownership does not
affect the business thus increases the possibility of success. Eg the death or retirement
of the owner.
Management/Control aspects
The owner must decide if they would prefer to keep control over the management.
➔ In a sole trader, partnership and close corporation the owners are involved in
day-to-day management.
➔ In a company, shareholders the management of the business is put on a board
of directors. (There is a difference between owners and management)
Capital requirements based on the size of business and nature of
good/service
The size of the business and nature of goods or service affects the amount of capital
needed. (More owners=More capital)
Types of ownership
Sole trader
, Number of owners
One owner to contribute to capital. Positives of a sole trader includes:
➔ Decision making is quick creating flexibility.
➔ Lowering risk of lost opportunities if having to consult with others.
➔ All profits go to one owner
◆ Could create motivation
The negatives include:
➔ Only one person can contribute capital.
➔ Owner relies on their own initiative and does not have any other input
into decision making.
➔ Owner may not have someone to cover for them if they are sick or on
holiday.
Formation Procedure
Easy to start. No requirements or procedures to follow in order to start a sole
trader. These limited costs may increase chances of success.
Legal personality and liability
Cannot be registered as a business with a separate legal persona from the owner
thus the owner has unlimited liability. (All personal belongings can be lost if the
business fails)
Tax
A sole trader has to pay their personal capacity on all profits taken from the
business. Progressive personal income tax scales are applied (The higher the
income the more you pay).
Continuity of Existence
There is no legal personality so there is no continuity of existence and a change
in ownership leads to the demise of the business unless sold.
Partnership
Number of owners
There is a min of two and no max of partners in a partnership.
Positives include:
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 EFT, 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 this summary from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller erinpoly1. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy this summary for R100,00. You're not tied to anything after your purchase.
