Business ownerships

1. Forms of ownership

2. Forms of Ownership
 Sole Trader
 Partnership
 Closed Corporation
 Private company
 Public company

3. Main Forms Of Ownership
 What are the three main forms of business organization, and what factors should
a company’s owner(s) consider when selecting a form?
 Choose a form of organization by evaluating:
 Owner’s liability for firm’s debts
 The ease and cost of forming the business
 The ability to raise funds
 The taxes

4. Sole Trader
 Form of ownership owned by one individual.
 Managed by the owner and there are no necessary formalities when starting a
business.
 Sole traders are not legal entities
 Profit made are added as other in come earned by the owner.

5. Characteristics Of A Sole Trader
 Owned and managed by one owner.
 No legal entities.
 Assets belong to owner.
 Profit belong to owner.
 Owner pays tax in own capacity.

6. Advantages
 Owner can simply start doing a business.
 Success of the business belongs to the owner.
 Owner runs the business as they see fit.

7. Disadvantages
 There is no continuity if the owner dies or retires.
 Limited capital contribution.
 Only the owners skills, time and energy is contributed to run the business.

8. Partnership
• A business relationship existing between 2
and 20 partners.

9. Characteristics
 Agreement between two or more people.
 Each partner makes capital contribution.
 Profit and losses are shared amongst partners.

10. Advantages
 All partners contribute towards the business.
 Responsibilities are shared amongst partners.
 Partners can deal with problem together.
 A partner can easily come into existence.

11. Disadvantages
 Partners always agree, this tends to slow down decision making.
 A bad decision by one partner can lead to losses of partnership.
 Partnership must dissolve if one partner dies or retires.
 Partners have unlimited liabilities for the debt of the partnership.

12. Private company

13. Characteristics
 Name must end with Pty Ltd.
 Owned by shareholders
 Minimum number of shareholder is one.
 Minimum number of directors is one.
 Private companies do not offer security to the public.
 Shareholders have limited liabilities for the debts of the business.

14. Advantages
 More capital can be raised by a company than an individual.
 There is continuity of existence.
 Auditing of financial statements is voluntary.
 Not necessary to appoint an auditor, audit committee or company secretary.

15. Disadvantages
 Restricted from raising funds directly from the public.
 Tax is paid on taxable income of the company and companies pay secondary tax
on dividends distributed to shareholders.
 Cost and formalities associated with forming a company.

16. Public companies

17. Characteristics
 Name must end with Limited or Ltd.
 Owned by shareholders.
 Minimum of shareholders is one.
 Minimum number of directors is three.
 Public companies may offer securities to the public.

18. Advantages
 Shareholders have limited liability for the debt of the company.
 May raise funds directly from the public by offering securities to the public.
 Continuity of existence.
 Public companies can raise more money than other forms of ownership.

19. Disadvantages
 Tax is paid on taxable income of the company and companies pay secondary tax
on dividends distributed to shareholders.
 Complicated process to incorporate a public company.
 Must appoint an auditor, audit committee and company secretary.

20. References
https://www.slideshare.net/NatJohnson/forms-of-business-ownership-43144933
https://www.slideshare.net/parrc/business-ownership-8829066
https://www.slideshare.net/nonkululekoS/forms-of-ownership-32065666
https://www.slideshare.net/KaoWinson/chapter-9-choosing-a-form-of-ownership-of-
sm-esesbm10e03?qid=da95b2fd-7b0f-4ae7-b93f-
f53a3d24869e&v=&b=&from_search=9