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10business Module2
10business Module2
• Module 3: Marketing
• Module 4: Accounting
Factors
leading to
Reasons for success or
establishing failure
a small Module 2
business
Establishing
a Small
Business
Sources of
finance +
pre-
operational
decisions
Session 1: Learning Intentions
• Define a small business
• List the reasons for owning a small business
• Identify the alternatives to establishing a small business
• Identify the resources required to establish a small
business
• Distinguish between businesses based on the nature of
their operations
• Identify and explain the advantages and disadvantages
of various ownership structures
• Explain why some small businesses succeed where others
fail
Module 2 Timeline
Hairdresser
Vines
Assignment Session 1:
Starting your own small business
Proprietary
Sole Proprietorship Partnership Company
(Pty Ltd)
Advantages Disadvantages
• Easy and cheap to set up • Unlimited liability – this liability can
• Owner has full control over extend to personal assets jointly owned
decision-making by another person (eg. family home)
• Owner receives all profits and • Business has limited life (if owner dies,
has full access to capital of continuity of the business is at risk)
the business • All start up capital must come from one
• Simple to wind up or sell person
• Owner may endure personal hardship
(long work hours)
Partnership
Partnership = 2 or more persons in business together operating
under their own names or as a registered business name, with a
view to making profit.
Advantages Disadvantages
• Easy and cheap to set up • Unlimited liability – this liability can
• Greater access to capital extend to personal assets jointly owned
and skills – more partners by another person (eg. family home)
mean more resources • Partnership has limited life (if 1 owner
• Simple to wind up or sell dies, is declared insane or leaves the
• Tax advantages can exist business, the partnership is dissolved)
where partner are married • Control over decisionmaking is shared –
(profits split between them, can lead to disputes.
giving them 2 tax-free • Profits are shared
thresholds)
Proprietary Company (Pty Ltd)
Proprietary Company = business that exists as a separate
legal entity that is entitled to do business in its own right.