Forms of Business Organizations

grade 10

acknowledgements

This presentation has been designed by N L Kekana with the use of some sources found in the

last slide of this presentation.

My business or our business.????

Different

•Forms of ownerships

Sole Traders• The most common

form of business organisation.• Owned and

operated by one person• Very few legal

requirements for setting it up.

Advantages

• Easiest and least expensive form of ownership to organize.

• Sole proprietors are in complete control, and within the parameters of the law, may make decisions as they see fit

• Sole proprietors receive all income generated by the business to keep or reinvest.

• Profits from the business flow directly to the owner's personal tax return.

• The business is easy to dissolve, if desired.

disadvantages• Sole proprietors have

unlimited liability and are legally responsible for all debts against the business. Their business and personal assets are at risk.

• May be at a disadvantage in raising funds and are often limited to using funds from personal savings or consumer loans.

• May have a hard time attracting high-caliber employees or those that are motivated by the opportunity to own a part of the business.

• Some employee benefits such as owner's medical insurance premiums are not directly deductible from business income (only partially deductible as an adjustment to income).

Partnership

What is partnership?Partnership is a type of business where 2 or more people agree to own, run and trade. Partnerships require a high degree of trust and are very common in fields such as medicine.

PartnershipWhen setting up a business a person has to decide whether to set up a business on their own or with others.This will depend on:• how much control they want over the business• are they prepared to share the profit• can they raise necessary capital to start up the

business by themselves

Partnership

• There is also a risk factor. Is this person prepared to accept the risk of unlimited ability?

Partnership

The advantages of partnership are:• easy to set up• solicitors and accountants are not required to run

the business• profits belong to the partners• privacy. Only tax authorities need to be told how

much partners are earning and profit of the business

Partnership

• often good relations between partners• raising capital for the business is easier than that of

sole proprietor• different expertise for partners e.g. 1 specialises in

accountancy whilst the other in marketingSome businesses have sleeping/silent partners. They play a little role in running day to day basis of a business but they provide the capital for the business.

Partnership

The disadvantages of partnership:• Disagreements between partners, which

can be bad for business• some partnerships don’t have a deed of

partnership, which can be bad for business• most partnerships are relatively small

businesses e.g. Shops, farms

PartnershipDefinitions:

• Ordinary Partnerships - there can be between 2 and 20 partners• Deed of Partnership - is the legal contract,

which sets out following:• who the partners are• capital brought into business by each partner• how profits should be shared

Partnership• how many votes each partner has in any

partnership meeting• what happens if there is a withdrawal of a

partner from the business

What Is a Corporation?

There are three types of corporations:•C-corporation•Subchapter S corporation•nonprofit corporation

corporationa business that is registered by a state and operates apart from its owners; it issues shares of stock and lives on after the owners have sold their interest or passed away

In a corporation, the owners of the business are protected from liability for the actions of the company.

The Main Idea

C-CorporationIn smaller corporations, the founders generally are the major shareholders.

shareholdersthe owners of a corporation

TWO TYPES OF CORPORATIONS

1.PRIVATE COMPANY• Closely held by a few

people• Minimum 2 and maximum

50 shareholders

partnership

• Stocks cannot be traded on exchanges and private equity cannot be raised

• Less regulations as compared to Public Companies

2. PUBLIC COMPANY•Stocks are held by a large number of people•Minimum 7 shareholders and no limit for maximum

Public company

• Can be listed on stock exchange and can go public• Have to follow many laws with regards to

the board composition and AGM.

List of references

•  John V. Padua,http://www.slideshare.net/johnpadua/forms-of-small-business-ownership• legal6 , http://www.slideshare.net/legal6/the-

legal-forms-of-business-presentation-872138• aureen-masuku , http://

www.slideshare.net/aureen-masuku/business-forms-15102218