Chapter 5: Forms of Ownership
Sole trader
Definition:
A business that is started and owned by ONE person and that person does not register
the business as a separate legal entity- one person has given all the capital (or borrowed)
and that one person gets all the profit (and carries all the risk)
Partnership
Definition:
A partnership is a business where 2 or more people become joint owners of the business.
-they share capital contributions, profits and losses using a predetermined ratio. The
business is not registered as a legal entity separate from the owners
A partnership agreement
In order for there to be a partnership their needs to be a partnership agreement. This
agreement defines the terms and conditions agreed upon by the partners and may be
entered into:
• Tacitly (by implication)
• Verbally
• In writing (always safer to put details in writing)
Companies
Definition:
A company is a legal entity incorporated in terms of ACT 71 of 2008. This includes a
company resisted under the previous company. A company will be registered with the
Companies and Intellectual Property Commission “CIPC”
The purpose of the Companies Act:
Companies Act 71 od 2008 has among other, the following goals:
• Encourage entrepreneurship in different sectors of the south African economy
• Promote overall well-being of the South African economy
• Simplify the process of registering and managing a company as a form of ownership
• Ensure rights and obligations of shareholders and directors are aligned with each
other by ensuring companies are managed in a responsible manner.
• Ensure non-profit companies are established and managed in manner that will make
their functioning more effective while ensuring accountability at the same time.
Sole trader
Definition:
A business that is started and owned by ONE person and that person does not register
the business as a separate legal entity- one person has given all the capital (or borrowed)
and that one person gets all the profit (and carries all the risk)
Partnership
Definition:
A partnership is a business where 2 or more people become joint owners of the business.
-they share capital contributions, profits and losses using a predetermined ratio. The
business is not registered as a legal entity separate from the owners
A partnership agreement
In order for there to be a partnership their needs to be a partnership agreement. This
agreement defines the terms and conditions agreed upon by the partners and may be
entered into:
• Tacitly (by implication)
• Verbally
• In writing (always safer to put details in writing)
Companies
Definition:
A company is a legal entity incorporated in terms of ACT 71 of 2008. This includes a
company resisted under the previous company. A company will be registered with the
Companies and Intellectual Property Commission “CIPC”
The purpose of the Companies Act:
Companies Act 71 od 2008 has among other, the following goals:
• Encourage entrepreneurship in different sectors of the south African economy
• Promote overall well-being of the South African economy
• Simplify the process of registering and managing a company as a form of ownership
• Ensure rights and obligations of shareholders and directors are aligned with each
other by ensuring companies are managed in a responsible manner.
• Ensure non-profit companies are established and managed in manner that will make
their functioning more effective while ensuring accountability at the same time.
