FORMS OF OWNERSHIP:

Forms of ownership refer to the structure of a business

and the relationship between its owners.

Most Common Types of Businesses in

Basic Concepts
• Capital:
The money provided by the owner to set up the business. Capital
is used to buy assets such as equipment, vehicles, machinery, etc.

• Legal personality:
Right of a person to own property, enter contracts, and sue or be
sued. The business may be seen as a legal entity.

• Continuity:
Ability of the business to continue operating, separately from its
• Liability:
owners. The business will stop existing if the owner retires or
Responsibility for liabilities (debt).
dies.
If limited, it means that owners cannot lose their personal
belongings.
If unlimited, the owners could lose their personal belongings to

1.SOLE OWNERSHIP
• Owned by one person.
• Small Businesses that don’t need a lot of Capital.
• Few legal formalities – easy to start.
• Assets and Liabilities belong to Owner
• Owner entitled to all profits and responsible for all debts.
• Unlimited liability – should the business fail, his/her personal
possessions will be sold to repay the debts.
• Owner pays tax in his personal capacity.
• Lifespan of the Business is linked to the health of the owner.

2. PARTNERSHIP
• Between 2 – 20 people
• All partners contribute money, equipment, or expertise to the partnership.
• Profits are divided according to an agreed-upon ratio.
• Losses are shared according to the agreed ratio.
• Used by professionals – doctors, attorneys, architects
• Partners have Unlimited liability for debts.
• Partners pay tax in their private capacity, not the partnership.
• Partnership agreement – a document stating each partner:
• contribution
• share of the profits/losses
• Steps to be taken to resolve disputes, etc
• If a partner leaves or another wants to enter, the partnership will dissolve, and a new one must be formed

3. CLOSE CORPORATION
• 1-10 Members
• Name must end with letters CC,
eg: Steelwork’s CC
• Has Legal Autonomy
 4. COMPANIES
• Raises money by selling shares
• Must comply with legal requirements of the Companies Act and
register with the Registrar of Companies.
• Registration is complex and expensive.
• Most companies require a lawyer to help them complete the
documents.
• The company has Legal autonomy, and the continuity does not
depend on the owners.
• The company is liable for debts and taxes and therefore the owners
have limited liability.
• Profits are divided among shareholders, according to how many
shares each person has – called dividends.

Private Companies: Public Companies:

• 1-50 shareholders • Any no. of shareholders over 7
• Share are bought and • Any member of the public may buy shares
sold privately with in the company
• Shares may be bought and sold in South
consent of the
Africa on the JSE.
shareholders. • Multinational companies with branches in
• Recognised by the many countries,
 5. Co-
• Operatives
Minimum 7 members for Agricultural Co-operative
• Minimum 25 members for trading Co-Operative.
• Main objective is service for co-operative members, not profit.
• Members join and contribute on a voluntarily basis.
• Members have limited liability.
• Co-operative has a legal personality.
• Name must end with co-operative.

6. FRANCHISE
An agreement where one person with an excellent product
(Franchiser)
sells the right to use the business name and sells its product or
service to another person (franchisee) by various stipulations, e.g;
 Corporation image
Characteristics
 of a Franchise: quality
Product/service
• Franchisee owns the business and pays a certain % of the sales (royalties) to
the Franchiser
• Entrepreneurial and management assistance is given to the Franchisee.
• It is very expensive to buy a Franchise.