Chapter 2 Flashcards
(7 cards)
What are the key factors to consider when choosing a form of business ownership?
Legal (juristic) personality
- Continuity (perpetual existence)
- Limited liability (separate legal personality)
- Financial needs
- Legal considerations
- Management structure
- Risk of failure
- Tax implications
- Potential future growth
What are the advantages and disadvantages of a sole proprietorship?
Advantages:
- Simple and inexpensive to create
- Owner has total decision-making authority
- No special legal restrictions
- Easy to discontinue
Disadvantages:
- Unlimited personal liability for the owner
- Limited skills/capabilities
- Limited access to capital
- Lack of continuity
- Limited growth potential
What are the advantages and disadvantages of a partnership?
Advantages:**
- Easy to form
- Diverse skills from partners
- Legal and natural persons can be partners
- More capital accumulation
- Minimal legal formalities
Disadvantages:
- Unlimited personal liability for partners
- Difficulty transferring ownership
- Potential conflicts between partners
- Lack of continuity (requires new agreement
What are the advantages and disadvantages of a close corporation?
A:
Advantages:
- Separate legal entity (limited liability)
- Increased capital potential
- Simple management
- Perpetual existence
Disadvantages:
- Limited to 10 members
- Juristic persons cannot be members
- No new CCs can be registered
- Stricter accountability under the Company Act
What are the disadvantages of co-operative societies?
A:
- High degree of legal regulation
- High operational costs
- Complicated decision-making
What is the objective of a business plan?
A: To outline the goals, strategies, and operational/financial plans of a business, ensuring clarity and direction for growth.
What are key location factors impacting a business?
A:
- Proximity to customers/suppliers
- Cost of premises
- Infrastructure/transport links
- Local labor market
- Government policies/tax incentives
