Business Studies Grade 10 - Chapter 7: Forms of Ownership

Flashcards for reviewing Business Studies Grade 10 Chapter 7 on Forms of Ownership post Covid-19

What is a form of ownership?

The legal position of the business and the way it is owned.

What is continuity in the context of business ownership?

Continue to exist even if a change of ownership takes place, e.g., a member or shareholder dies or retires.

What is surety?

If a person or business accepts liability for the debt of another person or business.

What are securities?

Shares and bonds issued by a company.

What does limited liability mean?

Loses are limited to the amount that the owner invested in the business.

What does unlimited liability mean?

The owner’s personal assets may be seized to pay for the debts of the business.

What is the Memorandum of Incorporation (MOI)?

The document that sets out the rights, responsibilities, and duties of shareholders and directors; serves as a constitution of a company.

What is a sole trader/sole proprietor?

A business is owned and controlled by one person who takes all the decisions, responsibility, and profits from the business they run.

What is a partnership?

An agreement between two or more parties that have agreed to finance and work together in the pursuit of common business goals.

What is a co-operative society?

Autonomous association of persons united voluntarily to meet their common economic/social needs/aspirations through a jointly owned and democratically controlled enterprise.

What is a company?

A legal person who has capacity and powers to act on its own.

What is a profit company?

A company incorporated for the purpose of financial gain for its shareholders.

What is a non-profit company?

An association incorporated not for gain.

What is a public company?

A voluntary association of ONE or more persons, governed by the company Act 71 of 2008, incorporated in terms of the Memorandum of Incorporation.

What is a private company?

A voluntary association of 1 or more persons.

What is a personal liability company?

A voluntary association of 1 or more person.

What is a state-owned company (SOC)?

A legal entity that is created by the government in order to participate in commercial activities on its behalf.

What is a partnership article?

A document that contains exhaustive provisions with regards to the matters concerning the business and the partners.

What is a prospectus?

A document inviting the public to buy securities/shares.

What is an Annual General Meeting (AGM)?

A meeting held once a year where the shareholders receive a report stating how well the company has done.

Who are directors?

People elected to the board of a company by the shareholders to represent the shareholders’ interests.

What is an audit?

Process where an organization’s accounts are checked to make sure its financial operations are honest.

What factors must be considered when choosing a form of ownership?

The size and nature of the business, management, risk bearing, how capital is raised, sharing of profit, liability, tax implications, continuity, legal person.

What are the differences between profit and non-profit companies?

One is established for profit, the other for charity or social/cultural activities.

What are the main forms of ownership?

Sole trader, partnership, close corporation, personal liability company, private company, public company, state owned company, non-profit company, co-operative.

Which forms of ownership are classified as profit companies?

Private companies, personal liability companies, public companies, state-owned companies.

Which forms of ownership are classified as non-profit companies?

Non-profit companies.

What are the main characteristics of a sole trader/proprietor?

Owned and managed by one person; handles everything from activities to decisions.

What are some advantages of a sole trader/proprietorship?

Little capital required, quick decisions, easy to adapt, owner takes all profits.

What are some disadvantages of a sole trader/proprietorship?

Unlimited liability, restricted growth, lack of capital, may lack knowledge/experience.

What is the definition of partnership?

An agreement between two or more people who combine labor, capital, and resources towards a common goal.

What are the characteristics of a partnership?

Partners combine capital, share responsibilities and decision making, and have unlimited liability.

What are the advantages of a partnership?

Extra partners can be brought in, workload and responsibility is shared, easy to establish.

What are the disadvantages of a partnership?

Partners may not contribute equally, lack of continuity, potential for conflict, unlimited liability.

What is a close corporation?

Owned by members, can have between 1 and 10 members.

What the key characteristics of a Close Corporation

A CC has its own legal personality with unlimited continuity.

What are the main advantages of a Close Corporation?

Easy to establish and operate, fewer legal requirements, not required to hold annual general meetings (AGM).

What are the main disadvantages of a Close Corporation?

Limited growth, members can be held personally liable under certain conditions, double taxation.

What is a private company?

One or more shareholders; can be small or large with one or more directors.

What are the chracteristics of a private company?

Requires one or more directors and one or more shareholders

What are the advantages of a private company?

Continuity of existence, managed by competent director(s), shareholders appoint directors, large ammount of capital.

What are the disadvantage of a private company?

Difficult to establish, directors may act in their own interest, must review financial statements.

What is a personal liability company?

Present and past directors are personally responsible for business debts.

What is the definition of a personal liability company?

It's very similar to a private company, except the present and past directors are personally responsible for any debts of the business.

What is a public company?

Registered to offer stock/shares to the public through the Johannesburg Securities Exchange (JSE).

What are some characteristics of a public company?

A minimum of one person is required to start and shareholders have limited liability.

What are the advantages of a public company?

Legal identity; can own assets/property. Shareholders may sell/transfer their shares freely.

What are the disadvantages of a public company?

Difficult and expensive to establish; financial affairs must be known publicly.

What are the differences between private and public companies?

The private company shares aren't freely transferable and public company is.

What are the differences between private company and personal liability?

The directors are NOT personally liable for the debts of the business in a private company.

What is a state-owned company?

The government as its major shareholder, operates as a commercial enterprise for the government.

What are the advantages of a state-owned company?

Profits may be used to finance other state departments. Services can be offered which may not be offered by private sector.

What are the disadvantages of a state-owned company?

Shares are not freely tradable making it difficult to raise capital. A lack of incentive for employees to perform.

What is a non-profit company?

Not formed with intent to make a profit, but established for public benefit.

What are the disadvantages of a non-profit company?

Need professional assistance to set up this organisation. Does not generate enough capital to cover their expenses

What are the advantages of a non-profit company?

Profits are used solely for the primary objective of the organization. Donors can receive tax deductions

What is a co-operative?

Sharing resources/infrastructures and costs to achieve a better outcome.

What are types of cooperatives?

Housing, worker, social, agricultural, burial society, financial services, consumer, transport.

What are the characteristics of Co-operatives?

Minimum of five members is required, motivated by service rather than profit, managed by a minimum of three directors.

What are the advantages of Co-operatives?

Members have limited liability, decisions are democratic, have continuity of existence

What are the disadvantages of Co-operatives?

Shares are not freely transferable. It can be hard to get a loan because primary issue is not always profit.