Precious wants to open his own small marketing company to advance her financial status.Advice precious on the different forms of companies available and indicate to her which form of company or companies will not suit her business interests in south africa for 6 marks

Answer 1

When Precious considers opening her own marketing company in South Africa, it's important to understand the various forms of business entities available, each with its own advantages and disadvantages. Here are the main types of business structures she can choose from:

1. Sole Proprietorship:

   • This is the simplest form of business where Precious would be the sole owner. It requires minimal registration but offers no legal distinction between her personal and business assets. This means full personal liability for business debts.

2. Partnership:

   • In a partnership, Precious would collaborate with one or more partners. Like the sole proprietorship, partners share liability for business debts. This structure can provide more resources but can also lead to conflicts and disagreements.

3. Private Company (Pty) Ltd:

   • This is a separate legal entity and the most common type of business structure in South Africa. A Private Company limits the liability of shareholders to the amount unpaid on their shares, protecting personal assets. It requires at least 1 director and can have up to 50 shareholders. It requires more regulatory compliance compared to a sole proprietorship or partnership.

4. Public Company (Ltd):

   • A public company can sell shares to the public and is required to have at least three directors. It allows for greater capital raising but involves significant regulatory compliance, higher costs, and public scrutiny. This may not suit Precious’s small scale marketing firm initially.

5. Co-operative:

   • A co-operative is owned and run by its members who use its services. It may not suit Precious unless she plans to engage a group of people for a common goal and share decision-making.

6. Business Trust:

   • A business trust operates like a company but is governed by a trust deed. It can be complex and may not be suitable for starting a small marketing company.

Recommendations:

Based on Precious's interests in starting a small marketing company, here are suggestions on which forms would not suit her business interests:

• Public Company (Ltd): This structure is not suitable for a small marketing firm as it requires extensive resources for compliance and reporting, often better suited to larger businesses seeking to raise capital from the public.

• Business Trust: This may also be unsuitable given the complexity involved in setting up and running a trust, which may not align with the objectives of a small marketing agency.

In conclusion, Precious should consider a Sole Proprietorship or a Private Company (Pty) Ltd as her best options, with the latter providing more liability protection and credibility as she grows her marketing business. However, a public company or business trust would not be suitable for her current business interests.