Principles of Management IIB (Entrepreneurship) by ProfessorBurgerQueen
Chapter 7: Selecting A Venture Form
The Sole Proprietorship
- The sole proprietorship is a business which is owned and managed by a single
individual;
- Considered to be the easiest way to start a venture;
- This form is useful because:
- It requires very few, if any, formal requirements to commence operations with
greater flexibility;
- It vests decision-making and control in one individual;
- All profits comes to the owner
- Drawbacks
- Sole proprietorships are personally liable for all the debts incurred by the
business. Unlimited liability has the risks of having their estates sequestrated
and assets attached, in order to recover monies owed to creditors;
- Sole contributors of capital, which limits growth potential;
- Lacks credibility in raising long-term finance (because they are ‘one-person’
operations;
- No separate legal identity means a lack of perpetual succession; and,
- Because there is only one individual running the operation, there are limited
skills and knowledge
The Partnership
- A partnership is a formal association between at least two but no more than twenty
(20) individuals who came together to conduct business;
- The partnership agreement is the basis is the partnership agreement;
- The partnership agreement consists of several elements which distinguish it
from other agreements, and in essence, define a partnership:
- Contributions
- Profit as objective
- Business carried on jointly and for joint benefit
- Liability
- Sharing of profits and losses
- Representation
- Ownership of assets
, Principles of Management IIB (Entrepreneurship) by ProfessorBurgerQueen
- Rights and duties of the partners
- Good faith
- Participation in management
- Reasonable Care
- Ownership and use of partnership property
- Sharing profits and losses
- Remuneration.
- Implications for the dissolution of the partnership:
- The partnership agreement terminates;
- Partners can no longer act on behalf of or bind co-partners after dissolution,
unless they are completing a transaction, which was initiated while the
partnership was still in existence;
- Disadvantages include:
- Unlimited liability: because it is not a distinct and separate legal entity,
partners are jointly and severally liable;
- The principle of mutual mandate: each partner has the power to represent
and bind the partnership in all transactions;
- Dissolution of the partnership based on personal circumstances: the
partnership is dissolved when any of the individuals die, retire, or is extradited
as well as when a new member is allowed to join
The Company
- Two categories of companies, namely non-profit and for-profit companies, are
considered under the Companies Act of 2008
- Types of companies
- Non-profit companies
- They are companies as defined by the Act as companies that are
incorporated for a public benefit or other object relating to one or more
cultural or social activities, or communal group interests
- Memorandum of Incorporation (MOI)
- Profit companies
- Categorised as:
- State-owned companies (SOEs);
- Private companies; and,
- Public companies
Chapter 7: Selecting A Venture Form
The Sole Proprietorship
- The sole proprietorship is a business which is owned and managed by a single
individual;
- Considered to be the easiest way to start a venture;
- This form is useful because:
- It requires very few, if any, formal requirements to commence operations with
greater flexibility;
- It vests decision-making and control in one individual;
- All profits comes to the owner
- Drawbacks
- Sole proprietorships are personally liable for all the debts incurred by the
business. Unlimited liability has the risks of having their estates sequestrated
and assets attached, in order to recover monies owed to creditors;
- Sole contributors of capital, which limits growth potential;
- Lacks credibility in raising long-term finance (because they are ‘one-person’
operations;
- No separate legal identity means a lack of perpetual succession; and,
- Because there is only one individual running the operation, there are limited
skills and knowledge
The Partnership
- A partnership is a formal association between at least two but no more than twenty
(20) individuals who came together to conduct business;
- The partnership agreement is the basis is the partnership agreement;
- The partnership agreement consists of several elements which distinguish it
from other agreements, and in essence, define a partnership:
- Contributions
- Profit as objective
- Business carried on jointly and for joint benefit
- Liability
- Sharing of profits and losses
- Representation
- Ownership of assets
, Principles of Management IIB (Entrepreneurship) by ProfessorBurgerQueen
- Rights and duties of the partners
- Good faith
- Participation in management
- Reasonable Care
- Ownership and use of partnership property
- Sharing profits and losses
- Remuneration.
- Implications for the dissolution of the partnership:
- The partnership agreement terminates;
- Partners can no longer act on behalf of or bind co-partners after dissolution,
unless they are completing a transaction, which was initiated while the
partnership was still in existence;
- Disadvantages include:
- Unlimited liability: because it is not a distinct and separate legal entity,
partners are jointly and severally liable;
- The principle of mutual mandate: each partner has the power to represent
and bind the partnership in all transactions;
- Dissolution of the partnership based on personal circumstances: the
partnership is dissolved when any of the individuals die, retire, or is extradited
as well as when a new member is allowed to join
The Company
- Two categories of companies, namely non-profit and for-profit companies, are
considered under the Companies Act of 2008
- Types of companies
- Non-profit companies
- They are companies as defined by the Act as companies that are
incorporated for a public benefit or other object relating to one or more
cultural or social activities, or communal group interests
- Memorandum of Incorporation (MOI)
- Profit companies
- Categorised as:
- State-owned companies (SOEs);
- Private companies; and,
- Public companies
