Term
| What makes a management team? |
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Definition
| Managers and other key persons who give an organisation its general direction |
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Term
| Characteristics of a strong management team. |
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Definition
*Capable of securing the resources needed to make business a success
*Reassures investors about their investment and the continuity of business
*Diversity of talent makes the team stronger than an individual entrepreneur |
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Term
| Define Sole Proprietorship |
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Definition
| A business owned by one person, who bears unlimited liability for the enterprise. |
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Term
| State the Advantages and disadvantages of Sole proprietorship option |
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Definition
Advantages
*Receives all of the business’s profits.
*Holds title to all of the business’s assets.
*Can easily sell or transfer ownership of the company name and assets.
*Requires no formal registration.
*Has absolute freedom from interference by other stakeholders.
Disadvantages
*Bears all business risk.
*Is subject to all claims of creditors.
*Has unlimited personal liability for business.
*Receives no tax-free benefits as an employee.
*Death/incapacity of owner terminates business.
*Is limited to the proprietor’s personal capital.
*Is taxed on business income as personal income. |
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Term
| Define the Partnership option |
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Definition
| A legal entity formed by two or more co-owners to carry on a business for profit. |
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Term
| Questions about partnership formation |
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Definition
*What is our business concept?
*How are we going to structure ownership?
*Why do we need each other?
*How do our lifestyles differ? |
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Term
| Describe Partnership insights |
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Definition
*Choose your partner carefully.
*Be open, but cautious, about partnerships with friends.
*Test-drive the relationship, if possible.
*Create a combined vision for the business.
*Prepare for the worst. |
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Term
| Describe Partnership Agreement |
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Definition
| A document that states explicitly the rights and duties of partners. |
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Term
| Describe Joint and Several Liability |
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Definition
| The liability of each partner resulting from any one partner’s ability to legally bind the other partners. |
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Term
| Describe the termination of a Partnership |
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Definition
| Provisions for rapidly responding to death or departure of a partner. |
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Term
| State the advantages and the disadvantages of the private company or Pty Ltd option. |
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Definition
Advantages
*Shareholders’ liability limited to the issues shared capital of the company
*Seen as no ‘fly-by-night’ operation
Disadvantages
*Expensive to set up
*Annual audit required
*Legal obligations as director |
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Term
| Describe the Public company or Ltd option |
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Definition
*Issues shares
*Must have at least three directors
*Only public companies may be listed on the Johannesburg Securities Exchange
*Must be audited and produce audited financial statements tabled with their shareholders
*Management invested in a board of directors |
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Term
| Describe the personal liability company Inc option |
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Definition
*Private company
*Current and previous directors may be held jointly and severally liable for debts and liabilities
*Incorporated by one or more persons for financial gain for the shareholders
*For individuals such as doctors, lawyers, engineers, accountants, sole traders, etc. |
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Term
| Describe the Share certificate |
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Definition
| A document specifying the number of shares of stock owned by a shareholder. |
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Term
| Describe a Preemptive right |
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Definition
| The right of current shareholders to buy new shares of stock before they are offered to the public. |
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Term
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Definition
*Ownership provides control over the business.
*Ownership limits liability to investment in the business.
*Ownership can be transferred without affecting the business’s operations. |
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Term
| Comparison of Basic Legal Forms of Organisation |
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Definition
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Term
| Factors Affecting the Choice of a Business’s Structure |
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Definition
1. Initial Costs
2. Continuity of the Business
3. Transfer of ownership
4. Management control
5. Attraction of capital
6. Income taxes
7. Liability of owners |
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Term
| Describe a business trust as a specialised Legal form of an organisation |
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Definition
| To protect personal assets against the risk of the business failing, to ensure continuity and to limit estate duty and other taxes. |
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Term
| Describe the cooperative Legal form of an organisation |
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Definition
| Legal entity owned and democratically controlled by its members. Members have close association with the enterprise as producers or consumers of its products or services. |
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Term
| Describe Section 21 Company or Non-Profit Organisation as a specialised Legal form of an organisation |
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Definition
*Provide some public service or have some public purpose that goes beyond serving the personal interests of their members, such as the promotion of social welfare, economic development, religion, charity, etc.
*May make a profit but no distribution of profit |
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Term
| Describe Strategic Alliances |
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Definition
*An organisational relationship that links two or more independent business entities in a common endeavour.
Benefits
*Reduced cycle times through shared resources
*Increased performance through synergistic combinations of financial resources and creativity
Risk
*Difficulty in establishing and maintaining alliances |
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Term
| Steps in Building Strategic Alliances |
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Definition
*Establish a healthy network of contacts.
*Identify and contact individuals within a business who are likely to return your call.
*Outline the partner’s potential financial benefits from the alliance (clearly a win–win opportunity).
*Learn to speak and understand the ‘language’ of your partner.
*Continue to monitor the progress of the alliance. |
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Term
| Describe Board of directors |
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Definition
*The governing body of a corporation, elected by the shareholders
*Inside directors work for the business
*Outside directors do not work for the business |
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Term
| What are the duties associated with the Directors |
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Definition
*Elect the business’s top management
*Approve top management’s strategic plans and policies
*Review top management’s performance
*Declare dividends |
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Term
| Contributions of Board of directors |
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Definition
*Bring knowledge and experience
*Review policy decisions
*Provide general direction
*Monitor the business’s ethical behaviour
*Mediate and resolve disputes among top management |
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Term
| Alternative of the board of directors |
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Definition
An advisory Board
*Provides advice but does not have the fiduciary responsibility for the direction of the organisation
*May be less threatening and more cooperative than a board of directors |
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Term
| Explain the term “Management Team” and discuss the three characteristics associated with a strong management team. |
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Definition
Management Team
•Managers and other key persons who give an organisation its general direction
Characteristics of a Strong Management Team
•Capable of securing the resources needed to make business a success
•Reassures investors about their investment and the continuity of business
•Diversity of talent makes the team stronger than an individual entrepreneur |
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Term
| Define the term “Board of Directors” and discuss the duties of the board of directors. |
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Definition
•Board of Directors - the governing body of a corporation, elected by the shareholders
•Duties
o Elect the business’s top management
o Approve top management’s strategic plans and policies
o Review top management’s performance
o Declare dividends |
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Term
| Explain the term “Partnership” and discuss the partner qualifications including the advantages and disadvantages Vicky and Regina has to consider when embarking on this form of ownership. |
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Definition
Partnership
o A legal entity formed by two or more co-owners ( 2- 20) to carry on a business for profit.
o Each partner needs to make a contribution
o Not a legal entity
Partner Qualifications
o Required: of legal age to contract
o Desired: honest, healthy, capable and compatible
Advantages
o Few formalities
o Partnership agreement (recommended for decision making and sharing of profits)
o No formal auditing requirements
o Each member to pay own taxes
o Can be easily converted into a company
o Each partner brings different skills and greater financial strength to the business
Disadvantages
o Each partner may be held liable for all debts
o Differences in opinion in regard to decision making could slow business processes
o Lesser degree of continuity
o Agreement dissolves each time a partner joins for leaves
o (20) Number of partners restricted to |
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Term
| Define the term “Strategic Alliance” and discuss the benefits and risks associated with a strategic partnership Vicky and Regina should consider. |
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Definition
Strategic Alliances - an organisational relationship that links two or more independent business entities in a common endeavour
•Benefits
o Reduced cycle times through shared resources
o Increased performance through synergistic combinations of financial resources and creativity
•Risk
o Difficulty in establishing and maintaining alliances |
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Term
| Identify five factors involved in the criteria for choosing an organisational form. |
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Definition
• Initial costs
• Continuity of the business
• Transfer of ownership
• Management control
• Income taxes
• Liability of owners |
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Term
| Define the term “Board of Directors” and discuss the relevant contributions board members bring to the table. |
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Definition
Board of Directors – The governing body of a corporation, elected by the shareholders
• Bring knowledge and experience
• Review policy decisions
• Provide general direction
• Monitor the business’s ethical behaviour
• Mediate and resolve disputes among top management |
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Term
| Setting up and maintaining successful strategic alliances are crucial for Township Bed and Breakfast. Discuss the goal of a strategic alliance and explain the steps Vicky and Regina embarked upon to establish successful strategic alliances. |
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Definition
• Establish a healthy network of contacts – these people can lead you to other contacts
• Identify and contact individuals within a business who are likely to return your call – contacts and senior level positions
• Do your homework and win points just for being prepared – clearly outline the partner’s potential financial benefits from the alliance
• Learn to speak and understand the “language” of your partner – to be able to pick up on subtle messages
• Make sure that any alliance offer is clearly a win-win opportunity – only those agreements that benefit all participating parties will endure
• Monitor the progress of the alliance to ensure that goals and expectations are being met, and make changes as they become necessary |
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