Read the case study below and answer the questions.
Alvada Creations (Pty) Ltd is a clothing brand specialising in funky African print clothing for weddings, matric dances and other special events. The clothing line includes male and female casual and formal wear. T. Phasha, the owner and
founder of Alvada Creations, reaches out to her customers through social media platforms like Facebook, Twitter, Instagram and WhatsApp. She runs Alvada Creations in a shopping mall in Diepsloot.
QUESTION
Which type of business is Alvada Creations? Name THREE advantages of this business structure.
Alvada Creations is a private company. Here are three advantages of this business structure:
1, Separate legal entity:
One advantage of Alvada Creations being a private company is that it is considered a separate legal entity distinct from its owners. This means that the company can enter into contracts, own assets, and incur liabilities in its name, shielding the personal assets of the owners from business debts and legal obligations.
2, Uninterrupted existence:
Another advantage is that as a private company, Alvada Creations enjoys uninterrupted existence. Its operations are not affected by the death or withdrawal of its shareholders or directors. The company can continue to operate regardless of changes in ownership or management, providing stability and continuity to its business activities.
3, Limited liability:
Private companies like Alvada Creations offer limited liability to their owners, which is a significant advantage. This means that the shareholders’ liability is limited to the amount of capital they have invested in the company. In the event of financial difficulties or legal issues, the personal assets of the shareholders are generally protected from being used to settle the company’s debts or obligations, providing a level of financial security to the owners.
Advantages of a Private Company
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