Forms of Ownership Business Studies Grade 12 Study Notes

Each form of business ownership has its own advantages and disadvantages, and the success or failure of a business will depend on a variety of factors. Understanding the key factors that can contribute to success or failure is essential for making informed decisions about the structure and management of a business.

Topics under Forms of Ownership

• Different Types of Ownerships
• Sole Trader
• Partnership
• Close Corporation
• Private Company
• Public Company
• Personal Liability Company
• State-owned Company
• Non-profit company
• Co-operative

Forms of Business Ownership

In business studies, it’s important to understand the different forms of business ownership and their respective characteristics. The following are the most common forms of business ownership:

1. Sole Trader: A sole trader is a business owned and operated by one person. The owner is personally responsible for all aspects of the business, including debts and liabilities. This form of ownership is simple to set up and manage, but the owner is also personally exposed to financial risk.
2. Partnership: A partnership is a business owned by two or more people who share the profits and responsibilities of the business. Partnerships are similar to sole trader businesses, but with the added benefit of shared expertise and resources. However, partners are also personally responsible for the debts and liabilities of the business.
3. Close Corporation: A close corporation is a type of partnership where the owners are also the directors and managers of the business. Close corporations are similar to private companies, but with fewer legal requirements and a smaller number of shareholders.
4. Private Company: A private company is a business owned by shareholders who have limited liability. This means that the shareholders are only responsible for the debts of the company to the extent of their investment. Private companies are usually smaller than public companies and have restrictions on the transfer of shares.
5. Public Company: A public company is a business that is owned by shareholders and is listed on a stock exchange. Public companies have a large number of shareholders and are subject to strict regulations and disclosure requirements. Public companies have greater access to capital, but also face increased scrutiny and regulation.
6. Personal Liability Company: A personal liability company is a type of business structure that combines the features of a sole trader and a private company. Owners have limited liability for the debts of the company, but are also personally responsible for the debts of the company.
7. State-Owned Company: A state-owned company is a business that is owned by the government. State-owned companies are often established to provide essential services or to regulate certain industries.
8. Non-Profit Company: A non-profit company is a business that operates for a social or environmental purpose, rather than for profit. Non-profit companies are exempt from certain taxes and are regulated differently to for-profit businesses.
9. Co-operative: A co-operative is a business owned and controlled by its members, who share in the profits and losses of the business. Co-operatives are often established to provide goods or services to their members and are governed by democratic principles.

Each form of business ownership has its own advantages and disadvantages, and the best form of ownership will depend on the specific needs and goals of the business. Understanding the different forms of business ownership is essential for making informed decisions about the structure and management of a business.

Important Terms to understand for Exam on Forms of Ownership

In the exam, you will definitely be asked how the following factors can contribute to the success or failure of each form of business ownership.

When starting a business, it’s important to consider the different forms of business ownership and how various factors can contribute to their success or failure. The following are some of the key factors to consider:

1. Name Restrictions: The name of a business can have a significant impact on its success. It’s important to choose a name that is memorable, relevant, and easy to spell. Depending on the form of business ownership, there may be restrictions on the use of certain names, such as trademarks or company names.
2. Capacity: The capacity of a business, in terms of employees, resources, and production capacity, can have a significant impact on its success. Depending on the form of business ownership, the capacity of a business may be limited by the resources and expertise of the owners, or by the size and capitalization of the business.
3. Tax Implications: The tax implications of a business can have a significant impact on its success or failure. Depending on the form of business ownership, a business may be subject to different tax laws and regulations, and may be eligible for different tax benefits and incentives.
4. Management: The management of a business is critical to its success or failure. Depending on the form of business ownership, the management of a business may be the responsibility of one person, a group of partners, or a board of directors. Effective management is essential for making informed decisions, managing resources, and achieving business goals.
5. Capital: Capital is the money and resources that a business has available to invest in growth and development. Depending on the form of business ownership, a business may have access to different sources of capital, such as loans, investments, or grants. Access to capital is essential for the growth and development of a business.
6. Division of Profits: The division of profits is an important consideration in any form of business ownership. Depending on the form of business ownership, the division of profits may be determined by the ownership structure, the management of the business, or the agreements between the owners.
7. Continuity: The continuity of a business is essential for its long-term success. Depending on the form of business ownership, a business may have different options for ensuring continuity, such as succession planning, selling the business, or transferring ownership to another party.
8. Liability: Liability refers to the financial and legal responsibility for the debts and obligations of a business. Depending on the form of business ownership, the liability of owners may be limited, shared, or personal. Understanding the liability implications of a business is essential for protecting personal assets and ensuring the success of the business.
9. Legal Requirements: The legal requirements for a business can vary depending on the form of business ownership. It’s important to understand the legal requirements for a business, including registration, taxation, and compliance with relevant laws and regulations.