Week 3: Establishing a Business and Goal Planning

Lesson Overview

• Types of Business Ownership

• Business Opportunities

• Taxation

• Business Planning

Prescribed Resources

• Establishing a Business: Textbook Chapter 3 (Sections 3.1 – 3.4)

• Planning: Textbook Chapter 7 (Sections 7.1 – 7.6)

• Additional Resources: myLMS notes, lecture slides, videos, and activities.

Objectives

1. Differentiate between types of business ownership and their pros/cons.

2. Identify new business ventures, franchising, buying a business, and corporate entrepreneurship opportunities.

3. Understand taxation types and the necessity of a Tax Clearance Certificate (TCC).

4. Outline the objectives of a business plan and its components.

5. Explain the importance of having a business plan and its stakeholders.

Case Study: Bill Gates' Leadership

• Key Traits Displayed:

  • Positive empowerment of employees.

  • Mentorship while allowing independent decisions.

  • Open communication and originality.

  • Role model with high moral standards.

  • Vision-oriented approach.

• Analysis via Maslow's Hierarchy of Needs:

  • Understanding of how Gates fulfilled employee needs through motivation, job security, and empowerment.

Types of Business Ownership

Considerations in Choosing Ownership Style

• Factors: Independence, liability, control, compliance, taxation, and transferability.

• Ownership Considerations:

  • Size, nature, management structure, financial needs, legal implications, and accountability.

Types of Ownership

1. Sole Proprietorship

   • Advantages: Easy formation, owner control, inexpensive.

   • Disadvantages: Full personal liability, limited skill diversity, lack of continuity.

2. Partnership

   • Advantages: Ease of formation, diverse skills, increased capital opportunity.

   • Disadvantages: Personal liability for partners, potential conflicts, lack of continuity.

3. Close Corporation

   • Advantages: Separate legal personality, limited liability, potential for increased capital.

   • Disadvantages: Limited to 10 members, certain accountability criteria.

4. Company

   • Advantages: Limited liability, potential for high capital acquisition, continuous existence.

   • Disadvantages: High operational costs, complex regulations.

5. Business Trust

   • Advantages: Flexible structure, limited liability, ease of formation.

   • Disadvantages: Limited capital access, potential for conflict.

Acquiring a Business

• Franchising: Business owners sell rights to business models to independent operators.

• Buy Existing Business: Inheriting operations with established customers and reputation.

• Establishing from Scratch: Turning passion into a business venture.

• Corporate Entrepreneurship: Innovative growth opportunities within an established business.

Understanding Taxes

Business Tax Types

• Register for income tax if trading as a corporation or close corporation.

• Additional registrations include PAYE (for employees), UIF (if over 24 hours/month), SDL (annual payroll > R500k), and VAT (if turnover > R1 million).

Tax Clearance Certificates

• Certification of compliant tax affairs essential for tender applications and business credibility.

• No issuance if tax returns are outstanding.

Business Plan Components

1. Objectives of a Business Plan:

   • Describe business opportunity and plan to exploit it.

   • Attract investors and financial resources.

2. Importance of a Business Plan:

   • Sell idea to self, obtain financing, gain strategic alliances, and motivate management.

3. Scope of a Business Plan:

   • Factors influencing planning: entrepreneur's style, management preferences, product complexity, and competitive environment.

4. Business Plan Components:

   • Executive summary, general company description, products/services, marketing plan, management plan, operating plan, financial plan.

Goals in Planning

• Importance of Setting Goals:

  • Provides guidance, allows effective planning, motivates, and forms evaluation basis.

• SMART Goals Criteria:

  • Specific, Measurable, Attainable, Relevant, Time-bound.