PowerPoint slides based on Forms of Ownership

1. FORMS OF
OWNERSHIP
BUSINESS

2. DEFINITION OF THE
FORMS OF OWNERSHIP?
the relation of an owner to the
thing possessed; possession with the
right to transfer possession to others
the state or fact of being an owner.

3. THE FORMS OF
OWNERSHIP
SOLE TRADER
PARTNERSHIP
CLOSE CORPORATION
COMPANIES (PRIVATE AND PUBLIC)

4. SOLE TRADER
• A sole proprietorship, also known as the sole trader or simply a
proprietorship, is a type of business entity that is owned and run by one
individual and in which there is no legal distinction between the owner and
the business.
• The owner receives all profits (subject to taxation specific to the business)
and has unlimited responsibility for all losses and debts. Every asset of the
business is owned by the proprietor and all debts of the business are the
proprietor's. It is a "sole" proprietorship in contrast with partnerships. A sole
proprietor may use a trade name or business name other than his or her
legal name.

5. ADVANTAGES AND DISADVANTAGES
ADVANTAGES
• It is easy to organize this business. Only small amounts of
capital are needed to start and run a business.
• It permits a high degree of flexibility to the owner since he/she is
the boss of the business establishment.
• Due to the owner's unlimited liability, some creditors are more
willing to extend credit.
• The owner receives all the profit of the business.

6. DISADVANTAGES
• Has limited resources. Banks are reluctant to grant loans to proprietorship
considering its small assets and high mortality rate.
• Unlimited liability for business debts. The single owner is responsible for
paying all debts and damages of their business.
• If the firm fails, creditors may force the sale of the proprietor's personal
property as well as their business property to satisfy their claim.

7. ONE MAN

8. PARTNERSHIP
• A business
organization in which two or more individuals manage
and operate the business. Both owners are equally and
personally liable for the debts from the business.
• There are two types of partners. General partners have an
obligation of strict liability to third parties injured by the
Partnership. General partners may have joint liability or joint and
several liability depending upon circumstances. The liability of
limited partners is limited to their investment in the partnership.

9. ADVANTAGES AND
DISADVANTAGES
ADVANTAGES
• Partnerships are relatively easy to establish.
• With more than one owner, the ability to raise funds may be increased, both
because two or more partners may be able to contribute more funds and
because their borrowing capacity may be greater.
• Prospective employees may be attracted to the business if given the
incentive to become a partner.

10. DISADVANTAGES
• Business partners are jointly and individually liable for the actions of the other
partners.• Profits must be shared with others. You have to decide on how you value
each other’s time and skills. What happens if one partner can put in less time due to
personal circumstances?
• Since decisions are shared, disagreements can occur. A partnership is for the long
term, and expectations and situations can change, which can lead to dramatic and
traumatic split ups.
• The partnership may have a limited life; it may end upon the withdrawal or death of
a partner.
• A partnership usually has limitations that keep it from becoming a large business.

11. 2-20 PARTNERS

12. CLOSE CORPORATION
• A corporation is a separate legal entity that has been incorporated
either directly through legislation or through a registration process
established by law. Incorporated entities have legal rights and
liabilities that are distinct from their employees and shareholders,
and may conduct business as either a profit-seeking business or
not-for-profit business.

13. ADVANTAGES AND
DISADVANTAGES
ADVANTAGES
• Registering a Close Corporation (CC) is a simple and relatively affordable option. It
is not expensive and there are only a few regulations.
• A CC does not have any legal complications that a company has. For example, a
CC is not required to have annual financial statements audited and a CC is not
required to hold annual general meetings. This makes running a CC easier than a
company.
• The CC is regarded as a legal entity/person, this is an advantage because it means
that the continuity of a CC is not linked to the status and life of the members.
• Income distributed to the members of the CC is exempted from normal income tax.

14. DISADVANTAGES
• Membership is restricted to ten and the capital may not be enough to
expand.
• A member of a close corporation can be held personally liable for a breach of
fiduciary duty and for losses suffered by the close corporation as a result of
the failure on the part of the member to act with skill and care.
• A close corporation cannot be sold to a company; it must first be converted to
a company.

15. 1-10 MEMBERS
• The name of the business
Must end with a CC word in
The end.

16. COMPANIES
Under companies we have two which is the PUBLIC(Ltd) and
PRIVATE (Pty Ltd)company
Private- A private company is a separate legal entity distinct from its
shareholders.
Public- shares can be sold to public and anyone can join. 7-indefinite
number of shareholders.

17. ADVANTAGES AND DISADVANTAGES
OF PUBLIC COMPANY
ADVANTAGES
• Publicly traded companies are able to raise funds and capital
through the sale (in the primary or secondary market) of their
securities, whether debt or equity. This is the reason publicly
traded corporations are important: prior to their existence, it was
very difficult to obtain large amounts of capital for private
enterprises. The profit on stock or bonds is gained in form of
dividend or capital gain to the holders of such securities.

18. DISADVANTAGES
Privately held companies have several advantages over publicly traded companies. A
privately held company has no requirement to publicly disclose much, if any, financial
information; such information could be useful to competitors

19. ADVANTAGES AND DISADVANTAGES
OF PRIVATGE COMPANY
ADVANTAGES
• Limited Liability: It means that if the company experience financial distress because
of normal business activity, the personal assets of shareholders will not be at risk of
being seized by creditors.
• Continuity of existence: business not affected by the status of the owner.
• Minimum number of shareholders need to start the business are only2.
• More capital can be raised as the maximum number of shareholders allowed is 50.

20. DISADVANTAGES
• Growth may be limited because maximum shareholders allowed are only 50.
• The shares in a private limited company cannot be sold or transferred to
anyone else without the agreement of other shareholders

21. LIST OF REFERENCES
• ownership. (n.d.). © Encyclopedia Britannica, Inc.. Retrieved March 09,
2014, from Dictionary.com
website: http://dictionary.reference.com/browse/ownership
• Family Business Sourcebook, Aronoff, Astrachan, and Ward
• Pettet, B. G. (2005). Company Law. Pearson Education. p. 151. "Reading
the above, makes it possible to forget that the shareholders are
the owners of the company.“
• Loewen, Jacoline (2008). Money Magnet: Attract Investors to Your Business:
John Wiley & Sons. ISBN 978-0-470-15575-2.