Welcome to Business Studies
• Grade 8
• By M.I Mlambo
• Learner will:
Know and understand the different types of forms of
Explain each form
Know the advantages and disadvantages of each form of
• Forms of ownership
1. SOLE PROPRIETORSHIP
• A sole proprietor is simply a person who is engaged in
business as an individual
• The owner takes all the risks of the business
• The owner receive all the profits of the business
ADVANTAGES OF SOLE
EASE OF STARTING AND ENDING THE BUSINESS. All you need is a
permit from the local government.
2. BEING YOUR OWN BOSS. Working for yourself is exciting.
3. PRIDE OF OWNERSHIP. Sole proprietors have taken the risk and
deserve the credit.
4. LEAVING A LEGACY behind for future generations.
5. RETENTION OF COMPANY PROFITS. You don=t have to share profits
6. NO SPECIAL TAXES. Profits of the business are taxed as the personal
income of the owner.
DISADVANTAGES OF SOLE
1. UNLIMITED LIABILITY is the responsibility of business owners for all of the debts of
2. LIMITED FINANCIAL RESOURCES. Funds available are limited to the funds that the
sole owner can gather.
3. MANAGEMENT DIFFICULTIES. Many owners are not skilled at record keeping.
4. OVERWHELMING TIME COMMITMENT. The owner has no one with whom to share
5. FEW FRINGE BENEFITS. Fringe benefits can add up to 30% of a worker=s income.
6. LIMITED GROWTH.
7. LIMITED LIFE SPAN. If the sole proprietor dies or leaves, the business ends.
A partnership is a legal form of business with two or more
TYPES OF PARTNERSHIPS.
1. A GENERAL PARTNERSHIP is a partnership in which all owners
share in operating the business and in assuming liability for the
2. A LIMITED PARTNERSHIP is a partnership with one or more
general partners and one or more limited partners.
• MORE FINANCIAL RESOURCES. Two or more people pool their
money and credit.
• SHARED MANAGEMENT AND POOLED/
• COMPLEMENTARY KNOWLEDGE. Partners provide different
skills and perspectives.
• LONGER SURVIVAL. Partners are four times as likely to
succeed as sole proprietorships.
• NO SPECIAL TAXES. All profits of partners are taxed as
personal income of the owners.
• UNLIMITED LIABILITY.
-Each general partner is liable for the debts of the firm, no matter who
was responsible for causing those debts.
-You are liable for your partners' mistakes as well as your own.
• DIVISION OF PROFITS. Sharing profits can cause conflicts.
• DISAGREEMENTS AMONG PARTNERS.
-Disagreements can arise over division of authority, purchasing
decisions, and so on.
-Because of such potential conflicts, all terms of partnership should be
spelled out IN WRITING to protect all parties.
• DIFFICULT TO TERMINATE. For example: Who gets what and what
• A FRANCHISE AGREEMENT is an arrangement whereby
someone with a good idea for a business (the FRANCHISOR)
sells the rights to use the business name and to sell a product
or service (the FRANCHISE) to others (the FRANCHISEE) in a
• MANAGEMENT AND MARKETING ASSISTANCE, including an
established product, help in choosing a location, and
assistance in all phases of operation.
2. PERSONAL OWNERSHIP: You are still your
own boss, although you must follow the rules, regulations,
and procedures of the franchise.
3. NATIONALLY RECOGNIZED NAME: You get
instant recognition and support.
4. FINANCIAL ADVICE AND ASSISTANCE.
ADVANTAGES OF FRANCHISES
a. Franchisees get assistance arranging financing and learning
to keep records.
b. Some franchisors will even provide financing to potential
5. LOWER FAILURE RATE.
a. Historically, the failure rate for franchises has been lower
than that of other business ventures.
b. You should carefully research any franchise before investing.
• LARGE START-UP COSTS.
a. Most franchises will demand a fee to obtain the rights to the
b. Start-up costs can be as high as R2 million for a Krispy
• COATTAIL EFFECTS.
a. The actions of other franchisees have an impact on the
franchise=s future growth and level of profitability, a phenomena
known as a COATTAIL EFFECT.
b. Franchisees must also look out for competition from fellow
• RESTRICTIONS ON SELLING.
a. Many franchisees face restrictions in the reselling of their
b. Franchisors often insist on approving the new owner, who
must meet their standards.
List of references
• Operations management(2012)