FORMS OF OWNERSHIP TERMINOLOGY

Capital- money or assets provided by the owners to set up the business.

Legal personality- companies and CCs have legal personality. This means that they are seen as legally separate from their owners. Partnerships and sole proprietors do not have legal personality and are seen as one with their owners. Businesses with legal personality may accept contracts in their own name, can sue and be sued separately from their owners.

Continuity - the ability of the business to carry on operating after the death or retirement of the owner or more than one of the owners

Liability- liability refers to the responsibility of the owner for the debt of the business.

Limited liability/ responsibility means that the owner/s (could be shareholders or members) only lose their investment in the business in the case of a business declared insolvent (bankrupt). The owners will not lose their personal belongings.

 Unlimited liability/ responsibility means that the owner/s could lose their personal belongings when the business has been declared insolvent as they have to take full responsibility to clear the business debt.

Tax- tax depends on the legal persona of the business. Sole Proprietors and Partnerships pay tax according to the progressive tax system up to a maximum of 40%, depending on the amount of income of their owners. Close corporations and companies are legal entities and pay 28% tax on their profits and a further secondary tax of 10% on profits paid out to members or shareholders. The tax amounts may vary every year and should be adapted to the amounts set in the national budget by the minister of finance.

Formation procedure- the legal route a business has to follow before it may start trading.

Jointly and severally- this refers to businesses with more than one owner involved and means that all the owners are responsible for each other's actions and for the debt of the business.

Memorandum of incorporation- it is the sole governing document of a company. It sets out the rights, duties and responsibilities of shareholders, directors, and any other person within a company (a legally binding document).