State Owned Companies, Personal Liability Companies and Sole Proprietorships

Flashcards about State Owned Companies, Personal Liability Companies and Sole Proprietorships

State Owned Companies

Companies owned by the state, with the purpose to undertake commercial activities on behalf of the state.

Personal Liability Companies

A company that satisfies the criteria of a private company but the directors are severally and jointly liable for the company's debts/liabilities.

Sole Proprietorship

A trading entity owned by a single natural person that does not form a separate legal entity distinct from its owner.

Business and Owner (Sole Proprietorship)

In a sole proprietorship, the affairs of the business and the personal affairs of the owner are contained in a single estate; legally they are not separate entities.

Owner's Responsibilities (Sole Proprietorship)

The owner owns all assets, receives all profits, and is responsible for all debts of the business.

Unlimited Liability (Sole Proprietorship)

The personal assets of the owner are at risk if the business cannot repay its debts.

Debts and Creditors (Sole Proprietorship)

When a sole proprietorship incurs debts, the owner is automatically indebted to the creditor.

Insolvency (Sole Proprietorship)

The estate of the proprietor may be sequestrated.

Employees (Sole Proprietorship)

Employee remuneration can be linked to profits.

Substance versus Form Test

Decides the true substance of an arrangement, disregarding its form or labels.

Consequence of Sole Proprietorship: 'Unlimited liability'

The personal assets of the owner are at risk.

Consequence of Sole Proprietorship: No 'perpetual succession'

The business will terminate when the owner dies.