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10 business studies > Forms of Ownership > Flashcards

Forms of Ownership Flashcards

1
Q

What is formation procedures?

A

The more legal formalities involved in starting a business.

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2
Q

Why is it consuming to establish a business?

A

The more expensive, difficult and time-consuming

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3
Q

When does business obtain a legal persona?

A

When it is registered

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4
Q

What does legal personality offer?

A

The owner is limited liability because the business can sue and be sued in its own right

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5
Q

What do business is not risk when it is limited liability?

A

They don’t risk losing their personal possessions

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6
Q

When will the business have continuity of existence?

A

Evan has legal persona apart from the owners

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7
Q

What happens if there is continuity?

A

There Is a change in ownership which does not affect the existence of the business 

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8
Q

What does continuity of existence increase?

A
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9
Q

What tax system applies to South African?

A

The progressive tax system

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10
Q

What does the progressive tax system mean?

A

The higher the income the higher the tax percentage

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11
Q

How much percent tax is sold traders and partners taxed on their personal profits?

A

Maximum of 45%

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12
Q

When will a sole trader or partner be taxed more than a CC or company?

A

When they receive a substantial amount of profit

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13
Q

Who is responsible to pay tax in ACCO company?

A

The business

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14
Q

What is the fixed percentage of tax that applies to the company?

A

28%

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15
Q

What taxable shareholders pay?

A

A dividends tax

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16
Q

When our owners usually involved in the day-to-day management of a business?

A

Soul trader partnership and close cooperation

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17
Q

When is there a separation between ownership and management?

A

In a company shareholders delegate the management of the business to a board of directors

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18
Q

What will determine the amount of capital required?

A

The size of the business

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19
Q

What else impacts capital requirements?

A

The type of product to be manufactured and sold, all the service rendered

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20
Q

What does more owners mean?

A

More capital

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21
Q

How many owners are there in a sole trader?

A

One owner

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22
Q

Name the positive aspects of having one owner

A

• Make quick decisions – gives flexibility to adapt to changing conditions
• Lowering the risk of lost opportunities
• Owners will get all profits – more motivated to be successful 

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23
Q

What problems increase the chances of failure in a sole trader?

A

• Limits the expansion and growth – only person you can contribute
• Relies on their own initiative – no one to discuss important decisions or alternatives
• No want to take over if ill or on holiday – management problems 

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24
Q

How do you start a soul trading business?

A

No requirement of procedures to follow. Limit costs and increases the chances of success

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25
Q

What can’t a sole trader be registered as?

A

A business with a separate legal persona from the owner

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26
Q

What legal personality and liability does a sole trader have?

A

Unlimited liability for the debts of the business. Their personal belongings belongings can be lost if the business fails

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27
Q

What capacity does a sole trader pay tax?

A

Personal capacity on all profits taken from the business

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28
Q

What text system is used for a sole trader?

A

Progressive personal income tax

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29
Q

How does a sole trader make provision for tax?

A

Reducing the profits they can reinvest the business as capital and limit the potential for future growth

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30
Q

What is the continuity of existence of a sole trader?

A

No continuity of existence as there is no legal personality

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31
Q

How can I still trade to have continuity of existence?

A

If it is registered and told to someone else

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32
Q

How many numbers of owners are there in a partnership?

A

Minimum of two and no maximum

33
Q

Why is the number of owners in a partnership good?

A

• More owners to contribute capital – business can grow and expand
• All partners actively involved in management – productivity can improve due to divisions of labour
• More than one person can decide on important issues – improve chances of success
• 

34
Q

What is negative about a partnership?

A

All parties have to agree before decision can be taken – slow decision making leads to loss opportunities and low chances of success

35
Q

What is the only formation procedure required for a partnership?

A

Partnership agreement or partnership articles

36
Q

How can a partnership agreement be entered?

A

Verbally, in writing, tactic

37
Q

Define the partnership agreement

A

A contract defining the terms and conditions as agreed upon by the partners

38
Q

Why is the information of a partnership easy and cheap?

A

Lack of formal establishment procedure

39
Q

Due to the formation of a partnership being cheap what is there more capital for?

A

To buy stock or equipment needed which improves the chances of success

40
Q

How does forming a partnership eliminate competition?

A

Eliminate competition between smaller so traders

41
Q

What does combining different skills of two so traders do?

A

Gives him a better competitive position and improves Chances of success

42
Q

What is a partnership is registered as?

A

Cannot be registered as a business
With a separate legal persona from the owners

43
Q

What legal personality and liability does a partnership have?

A

Unlimited liability and may motivate workers to work harder to be successful

44
Q

What could Unlimited liability lead to any partnership? 

A

Partners are jointly and severally responsible. This could make them over conscious and opportunities could be lost

45
Q

Does a partnership have continuity of existence?

A

No continuity of existence

46
Q

When must a partnership dissolved?

A

When a partner dies, retires or a new partner joins

47
Q

How is tax paid in a partnership?

A

Each

48
Q

How many owners are there in a close corporation?

A

10 owners

49
Q

Why would expansion be hard in a close corporation?

A

Large amount of capital needs to be raised

50
Q

Why is capital Limited and expansion in a close corporation?

A

Another CCO company may not have interest

51
Q

Who has to agree if a member wants to sell his interest?

A

All members have to agree

52
Q

Who is active in the management of the business in a close corporation?

A

The members – very suitable form of ownership for small businesses where the owners are involved in daily management

53
Q

What are the advantages of a close corporation?

A

• Members specialise in activity/management function – increase productivity
• More than one person decide – improve chances of success 

54
Q

What are the disadvantages of a close corporation?

A

• All members agree before decision – slow decision-making and loss opportunities
• Chance of conflict increases – remove people involved 

55
Q

Who does not ordered the financial statements of ACC?

A

Not to be audited by a chartered accountant

56
Q

What does no auditing fees of a close corporation mean?

A

Lower costs – more capital to expand

57
Q

Who has a sign of a statement? 

A

A member of SA IPA

58
Q

What does SAIPA stand for?

A

South African Institute of professional accounts

59
Q

What is a close corporation registered as?

A

A separate legal entity from the owners

60
Q

What liability to members of a close corporation have?

A

Limited liability

61
Q

When can a member of a close corporation lose the investments they made?

A

The business lands in a financial difficulties. Personal belongings are not at risk – more risks taken

62
Q

What continuity of existence does a close corporation have?

A

Unlimited Continuity

63
Q

When does Continuity end? CC

A

Members decided to discontinue business – liquidation or a result of court decision

64
Q

What tax does a close corporation pay?

A

Business tax

65
Q

What is the rate at which a close corporation pays tax?

A

Fixed percentage of 28%

66
Q

What are the number of owners in a company?

A

Minimum of one and no maximum of shareholders

67
Q

What is the maximum number of shareholders limited to? The number of shares available to be sold

A
68
Q

What do the shareholders of a company not have directions are in? The management of the business

A
69
Q

Who is management the responsibility of?

A

Board of directors who are appointed by shareholders at the annual general meeting

70
Q

What is a shareholders voting rights determined by?

A

The type a number of shares that they have

71
Q

Why do you not all shares have voting rights? Other benefits available such as hide evidence

A
72
Q

What are the implications of shareholders voting for directors?

A

• Directors are kept accountable
• Shareholders have a say through the voting process 

73
Q

What are the advantages of a company?

A

• Easier and faster decision-making and implementation
• More shareholder involvement
• Better relationships 

74
Q

What are the disadvantages of a company?

A

• More interaction and discussion – delay decisions in total consensus
• Limited input or lack of variety in skills on the board 

75
Q

Where are the shares of a public company freely negotiable?

A

On the JSELTD

76
Q

What does JCLTD stand for?

A

The South African stock exchange

77
Q

How do you obtain shares in a private company?

A

Bought by invitation from existing shareholders

78
Q

How can I shareholder in a private company sell his shares?

A

Permission of all the other shareholders

10 business studies (13 decks)

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