Notesale: Turn your study into money

Document Preview

Extracts from the notes are below, to see the PDF you'll receive please use the links above

---

Business ventures summary

written by

athi256

Did you know a seller earn
an average of $250 per month
selling their study notes
on Docmerit
Scan the QR-code and learn how you can also turn your class
notes, study guides into real cash today
...
com - The Best Study Notes

Uploaded by: athi256 on Docmerit
...


Annual General
Meeting (AGM)

A meeting to be held once a year in which the shareholders will receive
a report in which they say how well the company risk
...


Memorandum of
Incorporation (MOI)

The document outlining the rights, responsibilities and duties of
shareholders and directors are set out (serves as a co-creation of a
company)
...


Prospectus

Prospectus is a document that invites the public to buy securities /
shares
...


Dividends

An amount of money regularly (usually annually) paid by a company to
its shareholders from the profits (or reserves)
...


ABBREVIATIONS & ACRONYMS:
CC

Closed Corporation

BK

Beslote Korporasie

(PTY) Ltd
...


Eiendoms Beperk

INC
...


Geïnkorporeer

JSE

Johannesburg Stock Exchange

JEB

Johannesburgse Effekte Beurs

Ltd
...


Beperk

SOC

State Owned Company

NPC

Non-Profit Company

NWM

Nie-winsgewende Maatskappy

SAID

Suid-Afrikaanse Inkomstediens

MOI

Memorandum Van Inlywing/Inkorporasie

CIPC

Companies and Intellectual Property Commission

KMIE

Kommissie vir Maatskappye en Intellektuele Eiendom
2

IMPORTANT CONCEPTS
1
...


Money or assets offered by the owners to start the business
...
This means that they legally be seen as
separate from their owners
...
Businesses with legal
personality may enter into contracts in its own name, may sue and can be sued - and
their respective owners
...


CONTINUITY


The ability of the business to continue after the death or retirement of the owner or more
than one of the owners
...


LIABILITY


Liability refers to the responsibility of the owner for the debts of the business
...
The owners will not lose their personal assets
...


5
...




Sole Proprietors and Partnerships pay taxes on a sliding scale to a maximum of 45%,
depending on the amount of income of their owners
...
The
tax amounts can vary each year, and should be adjusted according to the amount to
be determined by the Finance Minister in the National Budget
...


ESTABLISHMENT PROCEDURE


7
...


SEPARATE AND SIMULTANEOUS


This refers to businesses with more than one owner and means that all owners are
responsible for each other's actions and for the debts of the business
...


1
...
1
...


NUMBER OF OWNERS

Only one owner

MANAGEMENT

Can make quick decisions without consulting others
...


LEGAL REQUIREMENTS
LIABILITY
LEGAL PERSONALITY
CONTINUITY
CAPITAL
PROFIT SHARING
TAXATION

There are no legal and administrative formalities in the form of a sole
proprietorship
...

A sole proprietor is not a legal entity and agreements entered into by the
owner in his / her personal capacity
...

Personal debt and business debt is one and therefore capital should be
carefully spent and managed
...

Depending on how much income is earned by the owner, his / her tax
rate will be lower than the corporate tax rate
...
2
...


DISADVANTAGES
 Unlimited liability
...


 Has no legal personality & continuity
...


 Owner accepts all risks
...


 Owners focus on some aspects and neglect

 In contact with customers, suppliers and
employees
...

 Owners are overworked
...

 No job security
...


2
...
1
...


NUMBER OF OWNERS

2 or more

MANAGEMENT

Partners share responsibilities and they are all involved in decision making
...


LEGAL REQUIREMENTS
LIABILITY
LEGAL PERSONALITY
CONTINUITY
CAPITAL

No legal formalities to start, only a written partnership agreement is
required
...

Partnership has no legal personality
...

Partners combine capital and may also borrow capital from financial
institutions
...


TAXATION

Partnerships do not pay taxes, partners pay personal income tax
...
2
...


DISADVANTAGES
 Unlimited liability
...


business
...


 Easier to get credit
...


 Expenses, responsibilities and tasks are

 Capital is limited to the number of partners

shared
...


allowed
...


5

Discuss/Explain/Describe CHARATERISTICS, ADVANTAGES & DISADVANTAGES of forms of ownership
...
CLOSE CORPORATION
3
...
CHARACTERISTICS:
CHARACTERISTIC

DESCRIPTION

NAME

The name must end with the suffix CC
...

The transfer of the interest of a member must be approved by all other
members
...
g
...

Members have limited liability, unless the CC has 6 months or longer than
ten members
...


CONTINUITY


...


CAPITAL

Each member contributes certain assets / services to the corporation
...


TAXATION

Pay tax on the profits of the business and declared dividends of members
...


3
...
ADVANTAGES AND DISADVANTAGES:
ADVANTAGES
 Limited liability
...


 Legal personality & continuity
...


the member shall be liable for losses
...


 Banks require a financial audit for loans
...


 Decisions take time
...


6

Discuss/Explain/Describe CHARATERISTICS, ADVANTAGES & DISADVANTAGES of forms of ownership
...
PRIVATE COMPANY
4
...
CHARACTERISTICS:
CHARACTERISTIC

DESCRIPTION

NAME

The company's name ends with letters (PTY) Ltd
...


MANAGEMENT

Managed at least by one competent highly skilled director
...


LEGAL REQUIREMENTS
LIABILITY

Register with the Registrar of Companies by setting Memorandum of
Incorporation (MOI)
Shareholders have limited liability and only lose their initial capital invested
if the business goes bankrupt
...


CONTINUITY


...


CAPITAL
PROFIT SHARING
TAXATION

Capital raised by issuing shares to its shareholders
...

Profits are shared in the form of dividends in proportion to the number of
shares held
...
/ Subject to double taxation
...
2
...


DISADVANTAGES
 Complex establishment process
...


 Can only rely on capital contributed by

 Number of shareholders allows for more
capital
...


members
...

 Subject to double taxation
...


7

Discuss/Explain/Describe CHARATERISTICS, ADVANTAGES & DISADVANTAGES of forms of ownership
...
PERSONAL LIABILITY COMPANY


It is very similar to a private company, and the DIRECTORS of a personal liability company are
jointly and seperately liable for all debts and obligations of the company
...


5
...
CHARACTERISTICS:
CHARACTERISTIC

DESCRIPTION

NAME

The company's name must end with letters INC
...


MANAGEMENT

They must have at least one director to their board
...


LEGAL REQUIREMENTS

In the MOI must be stated that it is a company with personal liability
...


LEGAL PERSONALITY

The business has a legal personality
...
as well as unlimited continuity
...
Shareholders then earn
profits (dividends) from shares
...

Pay tax on the profits of the business and declared dividends of
shareholders
...


5
...
ADVANTAGES AND DISADVANTAGES:
ADVANTAGES
 Limited liability
...


 Legal personality & continuity
...

 No AGM necessary
...
(Cannot get money from the
general public for capital
...

 Annual financial statements must be
reviewed by a qualified person, which is an
extra expense for the company
...

8

Discuss/Explain/Describe CHARATERISTICS, ADVANTAGES & DISADVANTAGES of forms of ownership
...
PUBLIC / PUBLIC COMPANY


A public company is registered to offer its shares to the general public
...
Shares are traded through the
Johannesburg Securities / Stock Exchange (JSE)
...
1
...
or Ltd
...

The law forces personal liability on directors who were consciously
reckless / fraudulent
...


LEGAL REQUIREMENTS

Register with the Registrar of Companies by setting up the Memorandum
...


LIABILITY

Shareholders have limited liability
...


CONTINUITY


...


CAPITAL

Capital raised by issuing shares to the public and borrow capital by
issuing debentures
...


TAXATION

Pay tax on the profits of the business and declared dividends of
shareholders
...


6
...
ADVANTAGES AND DISADVANTAGES:
ADVANTAGES
 Limited liability
...


 Legal personality & continuity
...

 Can attract skilled personnel because
they can pay them well
...

 Strict regulatory requirements to protect
shareholders
...
g
...

 AGM must be held
...

 Shareholders may have little or no input in
the affairs of the company
...


7
...

These businesses take on behalf of the government the role of commercial enterprises
...
1
...


NUMBER OF OWNERS
MANAGEMENT

Requires 3 or more directors and 1 or more shareholders
...

Shareholders vote for the most competent directors and they are
appointed to manage the company
...


LEGAL REQUIREMENTS

Register with the Registrar of Companies by setting up the
Memorandum of Incorporation
...


LEGAL PERSONALITY

The business has a legal personality
...
as well as unlimited continuity
...

Profits are shared in the form of dividends
...

Pay tax on the profits of the business and declared dividends of
shareholders
...


7
...
ADVANTAGES AND DISADVANTAGES:
ADVANTAGES
 Limited liability
...

 Supporting of government
...

 Profits can be used to finance other
government departments
...


DISADVANTAGES
 Not a true form of ownership because the
government controls all decisions
...

 May lead to poor management because the
government is not as effective as the private
sector
...

 Losses must be paid by the taxpayer
...


8
...


8
...
CHARACTERISTICS:
CHARACTERISTIC

DESCRIPTION

NAME

The name of the company must end with NPC / NPO
...


MANAGEMENT
CAPACITY

The board shall consist of at least 3 directors and can be well managed
as it requires a minimum of 3 (or more) directors
...


LEGAL REQUIREMENTS

It must draw up a Memorandum of Incorporation
...
Directors are liable for any loss / damage
/ costs experienced by the company
...


CONTINUITY


...


CAPITAL
PROFIT SHARING
TAXATION

Funded by donations
...

The main purpose is to serve and not to make profit
...

Qualifying NPC/NPO is granted tax-exempt status (tax deductions)
...
2
...

 Legal personality & continuity
...

 Assets to be transferred to a similar type of
company if company be dissolved
...


 Must keep financial and accounting records
...

 Exempt from paying tax to SARS
...

 Must hold an AGM
...


9
...


9
...
CHARACTERISTICS:
CHARACTERISTIC

DESCRIPTION

NAME

The word 'Cooperative Limited’ will appear at the end of the name
...


MANAGEMENT
CAPACITY

Members own and manage the business together
...
They are managed by at least 3 directors
...


LEGAL REQUIREMENTS

Must register with the Registrar of Co-operative societies
...


LEGAL PERSONALITY

The business has a legal personality and are allowed to own land and
open bank accounts
...


CAPITAL

The amount of capital that can be obtain by a co-operative is limited to
the number of members
...


PROFIT SHARING

Profits are shared equally amongst its members
...

9
...
ADVANTAGES AND DISADVANTAGES:


ADVANTAGES
Limited liability
...




Legal personality & continuity
...




and support of its members
...



for themselves
...




Auditing of financial statements compulsory
...

12

10
...
Tabulate the differences between a PRIVATE and a PUBLIC company
PRIVATE COMPANY

PUBLIC COMPANY

NAME

Name must end with Property Limited
/ (Pty) Ltd
...


MANAGEMENT

At least ONE director
...


CAPITAL

NO shares are offered to the general
public
...


SHARES

Shares are NOT freely transferable

Shares are freely transferable
...


Annual financial statements must be
audited and published
...


Should register and publish a
prospectus with the Companies and
Intellectual Property Commission
(CIPC)
...


Must collect a minimum subscription
before the start of the business
...
2
...


LIABILITY

The directors are NOT personally liable
for the debts of the company
...


13

11
...
1
...

Shareholders' private assets are protected because they have a limited liability
...

Companies have their own names and protected
...
2
...

11
...






OWNERSHIP AND MANAGEMENT:
Shareholders in a public company can freely buy and sell shares
...

It is less likely to use a business consultant, as they have a larger pool of skills and expertise
...


11
...






CAPITAL AND CASH FLOW:
A company may have more investors to finance the establishment of the enterprise
...

A company is not limited to the individual contribution of the members' capital
...

Directors do not have to obtain personal loans for the company to grow
...
5
...


Company shares may be transferred / purchased / sold
...
6
...


They can get rebates if they are involved in social responsibility projects
...


Discuss / Explain CHALLENGES of establishing a company in comparison to other forms
...
1
...


Conflicts can arise between owners of the company and management that are in control
...


Politics can get in the way and directors are appointed for the wrong reasons
...


A company may cease to exist if it is deregistered by the Registrar of Companies
...
2
...


FINANCIAL CHALLENGES:
The more shares there are, the less profit per share
...

They are expected to disclose all financial information which can provide an unfair
advantage to their competitors
...

Companies have more tax requirements and other taxes are high
...

Explain / describe / discuss the PROCEDURE FOR THE ESTABLISHMENT OF COMPANIES
...


STEP 7

Open a bank account and register for tax
...


14
...
g
...




Must appear on all COMPANY DOCUMENTS, e
...
on letterheads
...




Can be RESERVED for a period of 6 MONTHS by the CIPC
...




May NOT be a PERSON that implies / propose / mislead people into believing that the
company is part of another person / company / the state
...




Do NOT be ABBREVIATED or be TRANSLATED
...


15

Define the following concepts:
15
...
1
...

Companies are managed according to the rules set out in the MOI
...

MOI describe the relationship between the company and its stakeholders
...

Provide details about incorporation, the number of directors and share capital
...


15
...
Aspects to be included in the Memorandum of Incorporation / Incorporation:












Incorporators
Type of company
Securities of the company
Shareholders and meetings
Directors and officers
Name of the company
The main objectives of the company
Number of shares that would buy each incorporator
Amount share capital registered
Rules and regulations of the company
Name of the auditor

15
...
Notice of Incorporation / Incorporation:


The notice must be submitted with the standard form of Memorandum of Incorporation /
Incorporation, and it contains the following information:
o
Type of business
o
Financial year-end
o
Number of directors
o
Date of incorporation
o
Registered address
o
Company Name

16
...
1
...

This is a formal legal document detailing investment offers to the public
...

It gives information about the company
...
2
...
2
...
Meaning of the Initial Public / Public Offer / IPO:




This is when the company issues for the FIRST TIME shares to the public
...

Most companies take a "IPO" with the help of an investment banking firm that acts as an
underwriter
...
2
...
Meaning of the Secondary Offering:



A secondary offer is an offer of securities by a shareholder of the company as opposed to
the company itself, which is a primary offering
...


17

TOPIC 2: ROUTES FOR THE ACQUISITION OF BUSINESS
TERM
Trademark
Goodwill
Geographic Area

Overhead Costs

DEFINITION
A symbol, word or words that are registered or established lawfully used
as a company or product
...
Can a market by
region divided geographically, such as cities, counties, regions, countries
and international regions
...
This is the
expenses incurred by the company to stay in business, regardless of the
level of success
...


Incentives

A payment or concession to stimulate greater production
...






2
...

Easier to obtain finance as the business has a good history
...

Distribution, providing links and staff have been established
...

Existing assets form part of the business and does not need to be purchased
...

There are THREE MAIN TYPES franchises:

PRODUCT-franchise, where the franchise holder acts as a
retailer to sell specific products
...


PRODUCTION AGREEMENT-franchise, where the franchise giver
provide an essential component of expertise
...
1
...
The
before a commitment is made
...

of the franchise giver
...

operate
...

rights in a certain geographic area
...

the purchase of a franchise with a good
 A percentage of sales are usually shared
reputation
...

 Relationships with suppliers are already
established
...
2
...


A franchise agreement is drawn up when a franchise is sold and it is a legally binding
document
...

The FRANCHISE-GIVER is the person who created the goods or services and the right to
produce it to another person SALE
...

The FRANCHISE-HOLDER is the person or organization that the franchise SHOP
...

TERMS & CONDITIONS: A summary of what to do every party
...

THE FRANCHISE OWNER'S PAYMENTS: The initiation fee, patent holders compensation,
renewal, etc
...

WHAT THE FRANCHISE HOLDER OFFER: The provision of training, equipment, shop plans,
inventory, equipment, working capital, advertising and anything else agreed
...


Through a business with a famou

---