Summary Introduction to Business Management Chapter 3 Complete

Chapter 3
Introduction to the legal form of ownership
 Entrepreneurs can conduct business through various forms of enterprise.
 Sole proprietorship
 Partnership
 Close corporation
 Company


Considerations when choosing a form of enterprise
 Number of owners/ directors/ members (shareholders)
 Legal personality
 Limited liability
 Subscription of shares
 Legal regulations or prescriptions
 Liability to members or shareholders
 Degree of control or management authority
 Potential for capital acquisition
 Compliance with legal formalities and regulations
 Taxation
 Transferability of interests
 Transfer of ownership
 Continuity


Juristic persons:
 Companies, close corporations, co-operative societies (not liable for debts)
 Sole proprietorships and partnerships are not (liable for business debts)
When a business has a legal personality of its own it means the business is like the person in his or her own right
 For example, if a business acquire property, the property is registered in the business’ names. In other words, the
property belongs to the business entity or company
 In the case of a sole proprietorship the creditors sue a sole proprietor as is the only owner in his personal capacity.
It’s different from a company which is a legal entity on its own


The sole proprietorship
 Sole proprietorship is a business that is owned and managed by one individual
It is considered as a business that is both managed and owned by one individual. A sole proprietor could have a lot of
employees although it is owned by one individual who is fully liable in his or her personal capacity for all debts of the
business. But the owner is entitled to all the profits of the business