BUEL6212
Test 1 – 28 August
LU 1-4
LU 1: Introduction to business enterprise structures
Theme 1
Business enterprises in SA
Chapter 2
2.1, 2.5, 2.6, 2.7, 2.8
LO’s
Differentiate between the various business enterprise structures available in SA
Briefly differentiate between the various types of companies that are allowed in terms of the
Companies Act 2008
Briefly differentiate between an external company and a domesticated company
Advise clients on the most appropriate business enterprise structure to use in deciding to
establish a business
Explain the meaning and role of stokvels, how they operate within the SA economy
Companies and other business entities: Why incorporate a business
- Perpetual succession
- Allow active/ passive investors to contribute capital in return for shares
- Protection for shareholders when business fails/ being sued
Different enterprise structures
1. Sole trader
a. Owner has total decision-making authority
b. Not a separate legal person
c. No perpetual succession
d. Owner is liable without limitation
e. Owner has limited access to capital/ limited diversity in skills
, f. No favorable tax considerations
2. Partnership:
a. Two or more persons who operate a lawful business with objective of making
profit
b. Each partner must contribute something and the greater diversification of
skills
c. No legal personality
d. Partners jointly enter into all transactions and contracts and all assets
contributed and accumulated belong to all partners
e. Joint debts and claims
f. No perpetual succession
g. Increased opportunity for accumulation of capital with minimal legal
formalities and regulation
h. Each partner is taxed proportionally
3. Company
a. Registered in terms of companies act
b. Shareholders contribute money to a company which is used to purse the
object of the business = no limit on amount shareholders may invest = more
capital for business
c. Separation of ownership
d. Perpetual succession
e. High degree of legal regulation and very costly to manage
f. Governing document – memo of inc
g. Separate legal personality = company itself acquires rights and duties,
existing outside of its shareholders
h. Preferable tax rates
i. Limited liability on the shareholders
4. Close corporation
a. No new registrations but existing corporations prior to act still may run
b. Separate legal person
c. Assets are owned by corporation and not by members
d. Members have a fiduciary duty to the CC
e. Limited liability however the cc act provides circumstances in which personal
liability may arise
f. Allows for perpetual succession and exists independently from its owners
g. Max of 10 members
h. Characteristics of both a partnerships and a company
5. Business trust
a. Legal arrangement or instrument which is created to hold/manage assets to
the benefit of certain individuals
b. Ordinary trust where there are trustees to use the assets of the business trust
to run a business
c. Not a juristic but rather a contract or something formed in terms of the last will
and testament of a deceased person
d. Can provide for perpetual succession
e. No limit to number or trustees
f. Trustees can be personally liable for losses caused through misconduct or
negligence but beneficiaries cannot be held personally liable
, g. Trust essentially describes the relationship between people and assets
List 5 different forms of companies (S8 of Companies Act)
1. Public- Ltd
a. For profit company
b. Can be listed on stock exchange- public offering of shares permitted are
freely transferable
2. Private company- (Pty) Ltd
a. For profit company
b. M.O.I prohibits the offering of its shares to the public and restricts the
transferability of its shares
c. M.O.I sets out its status and in particular has provisions restricting the
transferability of its shares
3. State owned company- (S.O.C Ltd)
a. For profit company
b. Either owned by municipality or listed as a public entity in terms of Public
Finance Management Act.
c. Juristic person under the ownership and control of the national executive that
has been assigned financial and operational authority to carry on a business
activity.
d. Provides goods and services in accordance with ordinary business principles
and is fully or substantially financed from sources other than the National
Revenue Fund or tax.
4. Personal liability company- (Inc)
a. Used mainly by professional associations such as attorneys, stockbrokers
(that want the advan of corporate personality such as perpetual succession)
b. M.O.I sets out its status and in particular, the directors of such a company are
jointly and severally liable for all contractual debts and liabilities incurred
5. Non- profit company- must have at least one public benefit object and all assets
and income must be used to further the above-mentioned objectives of company.
Differentiate between an external VS domesticated company
- External company
o Foreign company that is carrying on business or non-profit activities in SA
and is compelled to register with the Commission within 20 business days
after it begins to conduct activities in SA
- Domesticated company
o Foreign company whose registration has been transferred to SA ito s13(5)-(9)
of the Act
10 elements to advise clients on the best enterprise structure
1. Applicable law
2. Different types
3. Separate entity (legal personality)
4. Control
5. Perpetual succession
6. Number of members
Test 1 – 28 August
LU 1-4
LU 1: Introduction to business enterprise structures
Theme 1
Business enterprises in SA
Chapter 2
2.1, 2.5, 2.6, 2.7, 2.8
LO’s
Differentiate between the various business enterprise structures available in SA
Briefly differentiate between the various types of companies that are allowed in terms of the
Companies Act 2008
Briefly differentiate between an external company and a domesticated company
Advise clients on the most appropriate business enterprise structure to use in deciding to
establish a business
Explain the meaning and role of stokvels, how they operate within the SA economy
Companies and other business entities: Why incorporate a business
- Perpetual succession
- Allow active/ passive investors to contribute capital in return for shares
- Protection for shareholders when business fails/ being sued
Different enterprise structures
1. Sole trader
a. Owner has total decision-making authority
b. Not a separate legal person
c. No perpetual succession
d. Owner is liable without limitation
e. Owner has limited access to capital/ limited diversity in skills
, f. No favorable tax considerations
2. Partnership:
a. Two or more persons who operate a lawful business with objective of making
profit
b. Each partner must contribute something and the greater diversification of
skills
c. No legal personality
d. Partners jointly enter into all transactions and contracts and all assets
contributed and accumulated belong to all partners
e. Joint debts and claims
f. No perpetual succession
g. Increased opportunity for accumulation of capital with minimal legal
formalities and regulation
h. Each partner is taxed proportionally
3. Company
a. Registered in terms of companies act
b. Shareholders contribute money to a company which is used to purse the
object of the business = no limit on amount shareholders may invest = more
capital for business
c. Separation of ownership
d. Perpetual succession
e. High degree of legal regulation and very costly to manage
f. Governing document – memo of inc
g. Separate legal personality = company itself acquires rights and duties,
existing outside of its shareholders
h. Preferable tax rates
i. Limited liability on the shareholders
4. Close corporation
a. No new registrations but existing corporations prior to act still may run
b. Separate legal person
c. Assets are owned by corporation and not by members
d. Members have a fiduciary duty to the CC
e. Limited liability however the cc act provides circumstances in which personal
liability may arise
f. Allows for perpetual succession and exists independently from its owners
g. Max of 10 members
h. Characteristics of both a partnerships and a company
5. Business trust
a. Legal arrangement or instrument which is created to hold/manage assets to
the benefit of certain individuals
b. Ordinary trust where there are trustees to use the assets of the business trust
to run a business
c. Not a juristic but rather a contract or something formed in terms of the last will
and testament of a deceased person
d. Can provide for perpetual succession
e. No limit to number or trustees
f. Trustees can be personally liable for losses caused through misconduct or
negligence but beneficiaries cannot be held personally liable
, g. Trust essentially describes the relationship between people and assets
List 5 different forms of companies (S8 of Companies Act)
1. Public- Ltd
a. For profit company
b. Can be listed on stock exchange- public offering of shares permitted are
freely transferable
2. Private company- (Pty) Ltd
a. For profit company
b. M.O.I prohibits the offering of its shares to the public and restricts the
transferability of its shares
c. M.O.I sets out its status and in particular has provisions restricting the
transferability of its shares
3. State owned company- (S.O.C Ltd)
a. For profit company
b. Either owned by municipality or listed as a public entity in terms of Public
Finance Management Act.
c. Juristic person under the ownership and control of the national executive that
has been assigned financial and operational authority to carry on a business
activity.
d. Provides goods and services in accordance with ordinary business principles
and is fully or substantially financed from sources other than the National
Revenue Fund or tax.
4. Personal liability company- (Inc)
a. Used mainly by professional associations such as attorneys, stockbrokers
(that want the advan of corporate personality such as perpetual succession)
b. M.O.I sets out its status and in particular, the directors of such a company are
jointly and severally liable for all contractual debts and liabilities incurred
5. Non- profit company- must have at least one public benefit object and all assets
and income must be used to further the above-mentioned objectives of company.
Differentiate between an external VS domesticated company
- External company
o Foreign company that is carrying on business or non-profit activities in SA
and is compelled to register with the Commission within 20 business days
after it begins to conduct activities in SA
- Domesticated company
o Foreign company whose registration has been transferred to SA ito s13(5)-(9)
of the Act
10 elements to advise clients on the best enterprise structure
1. Applicable law
2. Different types
3. Separate entity (legal personality)
4. Control
5. Perpetual succession
6. Number of members
