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Business > Forms Of Ownership [5] *G11 > Flashcards

Forms Of Ownership [5] *G11 Flashcards

1
Q

What are the Characteristics in F.O.O *7

A

*Formation Procedures
*Legal persona
*Continuity of existence
*Liability for debts
*Tax implications
*Management + control aspects
*Capital requirements

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2
Q

Explain formation procedure *2

A

*According to law, some businesses have to be registered while others don’t
*more procedures = more costly

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3
Q

Explain Legal Persona *2

A

*If law requires a business to be registered, it becomes a separate legal entity
*The legal person that owns the business can enter contacts, sue and be sued

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4
Q

Explain Continuity of existence

A

*Legal persona = continuity of existence
Therefore if an owner dies, the business is not affected

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5
Q

Explain liability for debts *2

A

*If a business is a legal entity, it’s responsible for its own debt (owner can’t be liable)
*If a business isn’t a legal entity, the owner enters contact on their own will (owner can be liable)

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6
Q

Explain tax implications *2

A

*If a business is a legal entity, it is liable to pay
*If a business isn’t a legal entity, the owner is liable to pay

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7
Q

Explain management and control aspects *2

A

*If a business is a legal entity, people involved must manage
*If a business is not a legal entity, the law doesn’t specify who manages

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8
Q

Explain capital requirements

A

Capital requirements are based on size and nature

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9
Q

What is a Sole Trader

A

*a business owned and started by one person
*doesn’t register business as a separate L.E.

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10
Q

What is a partnership

A

*a business where 2+ people are joint owners
*business not registered as a L.E
*a predetermined ratio is used for profit, loss and capital

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11
Q

What is needed to establish a partnership

A

A partnership agreement

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12
Q

What is a partnership agreement

A

Terms and conditions agreed upon partners

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13
Q

Partnership agreements can be entered… *3

A

Tacitly
Verbally
In writing

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14
Q

What is a company

A

A legal entity incorporated

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15
Q

What’s the purpose of the companies act *min 4 max 6
(entrepreneurship.promotes.wellbeing.really.effectivly.simply)

A

*to encourage entrepreneurship
*to promote participation in different economic sectors
*to promote wellbeing of SA economy
*to ensure rights and obligations of shareholders/ directors are aligned
*ensure NPCs are functioning effectively
*to simplify company registration processes

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16
Q

Private companies may not… *2

A

*be state owned
*issue shares to the public

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17
Q

Public companies can… *2

A

*list on JSE
*offer shares to the public

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18
Q

Dividends definition

A

Profit divided among shareholders

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19
Q

MOI stands for…

A

Memorandum of Incorporation

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20
Q

AFS stands for…

A

Annual Financial Statements

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21
Q

IFRS stands for…

A

International Financial Reporting Standards

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22
Q

Equities definition

A

Owners of shares

23
Q

Equities become (a
And expect b)
*2

A

a) business owners
b) ROI

24
Q

ROI (registered on JSE) is in the form of a) and b) *2

A

a) dividends
b) increase in share price

25
Q

What are blue chip shares

A

Shares (proven longterm) than are financially stable
-share prices don’t fluctuate
-good dividends are shared

26
Q

Company names may not be… *2

A

*undesirable/hateful
*misleading

27
Q

Private companies must end with…

A

(Pty) Ltd

28
Q

Public companies must end with…

A

Ltd

29
Q

State owned companies must end with…

A

SOC Ltd

30
Q

Non profit companies must end with…

A

NPC

31
Q

What is the procedure to register a company *3
(pay.now.ma’am)

A

*pay a required fee
*complete a notice of incorporation
*register on MOI

32
Q

What is an MOI

A

The founding document to start a company
-describe duties + responsibility

33
Q

What does an MOI stipulate *4
(some.rights.do.rock)

A

*different types of shares sold
*associated rights of shareholders
*duties of shareholders
*responsibilities of shareholders

34
Q

Minimum shareholder for a public and private company

A

1

35
Q

Minimum directors for a public company

A

3

36
Q

Minimum directors for a private company

A

1

37
Q

What is prospectus

A

A written invitation to the public to buy company shares

38
Q

If a prospectus is issued for the purpose
Of raising capital for property
Or a business venture, what details must be included *4
(pink.apples.change.green)

A

*purchase price
*address
*how must payed in cash + how the rest will be defrayed
*if business is taken over, how much is paid for customer goodwill

39
Q

What are requirements in a prospectus *4
(i.sign.green.kites)

A

*note on front page indicating registration
*directors must sign with the date
*contain general information
*indicate the extent of complying to KR+C, and if not why

40
Q

Shareholders can attend meetings… *3

A

*in person
*online
*on behalf of a proxy

41
Q

How many days notice do public and private companies have for meetings *2

A

*public - 15
*private - 10

42
Q

What are the duties of directors *3
(best.donuts.oreo)

A

*to act in the best interest of the company
*may not act in a way benefiting themselves while disadvantaging the company
*obliged to disclose personal/financial interests to prevent conflict of interest

43
Q

What is some general information found in a prospectus *4
(typo.has.sage.files)

A

Business type
History
Shares already issued
Finances for the last 3 years

44
Q

What are financial obligations of a company

A

AFS must meet IFRS then be filed with CIPC

45
Q

Public companies need their AFS…

A

Audited

46
Q

Public companies have to appoint *3

A

*a public secretary
*an internal audit committee
*an external auditor

47
Q

What is the job of a public secretary *4
(Lime.green.really.cute)

A

*make directors aware of legislation
*guide directors
*ensure minutes are recorded
*ensure required documents are filed with CIPC

48
Q

What requirements must a company meet before dividends can be declared *2

A

*solvency tests
*liquidity tests

49
Q

What does solvency test do

A

Sees if assets > liabilities

50
Q

What do liquidity tests do

A

Determine the financial position
To settle debt
Due in the next 12 months

51
Q

Ltd in a name implies

A

Liability of shareholders is limited

52
Q

What does it mean to float a company

A

To issue shares to the public

53
Q

What does it mean to be jointly and severally liable *2

A

*jointly - partners responsible for liability as a whole
*severally - partners are responsible for own liability

54
Q

What’s the Difference between limited and unlimited liability *2

A

*limited - debt liability restricted to amount put in business
*unlimited - debt liability is not restricted to amount put in business

Business (17 decks)

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