Chapter 3 Flashcards
(17 cards)
Characteristics of a sole proprietorship
Legal personality: none
Continuity: none
Limited liability: unlimited
Degree of control: direct control
Potential for capital acquisition: limited depending on owners financial strength
Legal formality: easiest and least expensive form to set up
Taxation: not separate taxpayer
Ease of transfer: sale of business, closure, giving of assets
Characteristics of a partnership
Legal personality: none
Continuity: dissolves through change in membership
Limited liability: unlimited, partners jointly liable
Degree of control: based on partnership agreement
Potential for capital acquisition: improved potential but limited by number of partners
Legal formalities: none
Taxation: not separate taxpayer
Ease of transfer: more complicated, must comply with partnership agreement
Characteristics of a close corporation
Legal personality: yes
Continuity: perpetual existence
Limited liability: yes
Degree of control: based on association agreement
Potential for capital acquisition: higher than partnership
Legal formalities: comply with companies act, founding statements, independent audits
Taxation: separate taxpayer
Ease of transfer: transfer does not affect existence of corporation
Characteristics of a private company
Legal personality: yes
Continuity: perpetual existence
Limited liability: yes
Degree of control: ownership separate from control
Potential for capital acquisition: strict regulation, loans, can’t sell shares
Legal formalities: many legal prescriptions, not as strict as public companies, 1 director minimum, no independent auditors, MOI
Taxation: separate taxpayer, fixed rate on income, small limited income, pay on sliding scale
Ease of transfer: shares are not freely transferable, must be approved by board, does not affect existence
Characteristics of a public company
Legal personality: yes
Continuity: perpetual existence
Limited liability: yes
Degree of control: ownership separate from control
Potential for capital acquisition: strict, loans, sale of shares
Legal formalities: strict and lots, 3 directors minimum, independent auditor
Taxation: separate taxpayer, fixed rate
Ease of transfer: freely transferable through private sale or stock exchange
Characteristics of a state-owned company
Legal personality: yes
Continuity: perpetual existence
Limited liability: yes
Degree of control: ownership separate from control
Potential for capital acquisition: municipality - taxpayers, public entity - sell shares
Legal formalities: strict accountability, must appoint audit committee
Taxation: separate taxpayer, fixed rate pay on sliding scale
Ease of transfer: transfer shares set out in MOI
Characteristics of a personal liability co (inc)
Legal personality: yes
Continuity: perpetual existence
Limited liability: members are jointly and severally liable
Degree of control: ownership separate from control
Potential for capital acquisition: capital increased due to liability clause signed
Legal formalities: professional rules, 1 director minimum, no need to independent audit
Taxation: separate taxpayer, fixed rate
Ease of transfer: can’t offer shares to public, transfer set out in MOI
Characteristics of a non-profit
Legal personality: yes
Continuity: perpetual existence
Limited liability: yes
Degree of control: ownership separate from control
Potential for capital acquisition: depending on sound financials
Legal formalities: minimum of 3 directors, 1 non-profit objective
Taxation: can apply for tax exemption
Ease of transfer: ownership rights can’t be sold
Characteristics of a business trust
(not super important)
Legal personality: yes based on companies act
Continuity: perpetual existence
Limited liability: yes
Degree of control: trust founders can amend trust deed
Potential for capital acquisition: limited potential, capital provided by trust founder
Legal formalities: not registered with CIPC, no onerous legal regulations
Taxation: separate taxpayer
Ease of transfer: transfer can be achieved by variation of the trust deed
Characteristics of a co-operative society
(not super important)
Legal personality: yes
Continuity: perpetual existence
Limited liability: yes
Degree of control: democratic decision making, members and directors
Potential for capital acquisition: limited due to sustainability issues
Legal formalities: register with CIPC, controlled by co-operatives act
Taxation: separate taxpayer
Ease of transfer: requirements for membership voted on by members
Considerations of choosing a legal form
- legal personality
- continuity
- limited liability
- degree of control
- potential for capital acquisition
- compliance with legal formalities
- taxation
- ease of transfer
Management of state owned companies
- Companies Act
- Secretaries and audit committees
- Directors and shareholders
- AGM
- Governance
- KING Code
- Public Financial Management Act
Importance of the business plan
- sell the business to the founders
- obtain financing
- obtain investment funds
- arrange strategic alliances
- obtain large contracts
- attract key employees
- complete mergers and acquisistions
- motivate and focus the management team
Internal stakeholders
- management team
- employees
External stakeholders
- customers
- investors
- bank - capital, collateral, character, conditions
Format of a business plan
- executive summary
- general description of venture
- products and services plan
- marketing plan
- operating plan
- financial plan
- supporting materials
Location factors
(Chapter 3)
- source of raw materials
- availability of labour
- proximity and access to the market
- availability and cost of transport facilities
- availability and cost of power and water
- availability and cost of a site and buidings
- availability of capital
- attitude, regulations and tariffs of local authorities
- existing business environment
- social environment
- climate
- central government policy
- personal preference
