Factors Forms of ownership
1. Legal persona
2.
3.
Liability for debt of business
Tax implications
Partnership characteristics
4. Continuity
=>
Verbal or written agreement between 2-30 ppl that
5. Management and control combine money and skill
6. Capital - size of business
-
Not legal entity can't be registered as separate
7. Formation procedure legal entity
Individual partners are legal entities
3
-they enter into contracts on behalf of business
Unlimited liability Lose personal belongings -
Profits and losses shared amongst partners
if can't settle debts according to ratio
Belongings aren't at risk if
-
Relationship is based on good faith
Limited liability Partners share responsibilities
unable to cover debts of debts
-
The more you earn the more you
Progress tax
Details in partnership agreement
pay (45%) - maximum tax paid by
individuals
-
Name of business
Forms of ownership Y
Address of business
>
-
Names and id numbers of all partners
-
Sole proprietorship/sole trader >
-
Contribution of partners
-
Partnership -
Percentage ownership of each partner
-
Company -
Decision making procedures
-
Process to dissolve partnership
-
Arbitration clause - procedure for settling disputes
Sole trader characteristics among partners
Owned by one person
Contribute capital-own or borrowed capital
Liability of partners for debts of business
y
Special skill and control to start business
(amount of skill can be limited) I
Unlimited liability
-
Not a separate legal personality - not registered z
Jointly and severally liable for debts
-
Legal personal ent er contracts on behalf of business
·
Each partner pays tax in personal capacity on amount
-
Unlimited liability-full responsibility of debt of profit received
-
No continuity ·
Continuity is dependent on lifespan of another
-
Earn money 10 give income to employees partners
-
Owners pay tax (progressive tax)
Advantages Disadvantages
Formation procedures - very quick to establish Formation procedure - cannot be registered so not
Number of owners=1 - take all profit separate between owner and business-unlimited liability
(More profit more profit earned) Number of owners = 1 - growth is limited
Management and control - quick decision making Capital is limited
-
Gain experience
-
Carry all responsibilities
-
Close relationship with
-
Management and control - owner can't discuss decisions
so nobody to oversee business
customer
Tax-profit is high, tax rate is higher than 45%
Tax - profit is low the rate owner can be taxed on is
Lower than 45%
1. Legal persona
2.
3.
Liability for debt of business
Tax implications
Partnership characteristics
4. Continuity
=>
Verbal or written agreement between 2-30 ppl that
5. Management and control combine money and skill
6. Capital - size of business
-
Not legal entity can't be registered as separate
7. Formation procedure legal entity
Individual partners are legal entities
3
-they enter into contracts on behalf of business
Unlimited liability Lose personal belongings -
Profits and losses shared amongst partners
if can't settle debts according to ratio
Belongings aren't at risk if
-
Relationship is based on good faith
Limited liability Partners share responsibilities
unable to cover debts of debts
-
The more you earn the more you
Progress tax
Details in partnership agreement
pay (45%) - maximum tax paid by
individuals
-
Name of business
Forms of ownership Y
Address of business
>
-
Names and id numbers of all partners
-
Sole proprietorship/sole trader >
-
Contribution of partners
-
Partnership -
Percentage ownership of each partner
-
Company -
Decision making procedures
-
Process to dissolve partnership
-
Arbitration clause - procedure for settling disputes
Sole trader characteristics among partners
Owned by one person
Contribute capital-own or borrowed capital
Liability of partners for debts of business
y
Special skill and control to start business
(amount of skill can be limited) I
Unlimited liability
-
Not a separate legal personality - not registered z
Jointly and severally liable for debts
-
Legal personal ent er contracts on behalf of business
·
Each partner pays tax in personal capacity on amount
-
Unlimited liability-full responsibility of debt of profit received
-
No continuity ·
Continuity is dependent on lifespan of another
-
Earn money 10 give income to employees partners
-
Owners pay tax (progressive tax)
Advantages Disadvantages
Formation procedures - very quick to establish Formation procedure - cannot be registered so not
Number of owners=1 - take all profit separate between owner and business-unlimited liability
(More profit more profit earned) Number of owners = 1 - growth is limited
Management and control - quick decision making Capital is limited
-
Gain experience
-
Carry all responsibilities
-
Close relationship with
-
Management and control - owner can't discuss decisions
so nobody to oversee business
customer
Tax-profit is high, tax rate is higher than 45%
Tax - profit is low the rate owner can be taxed on is
Lower than 45%
