1. nature of business- types of businesses

Question 1

how can a business be classified?

Answer 1

Size
Geographical spread
Industry sector
Legal structure

Question 2

sizes of businesses

Answer 2

1. micro business
   - A business that operates on a very small scale.
   - A micro business employs fewer than five people (including the owner).
2. Small
   fewer than 20 employees
3. medium
   20-199 employees
4. large
   200+ employees

Question 3

what is geographical spread

Answer 3

Geographical spread is the presence of a business and the range of its products across a suburb, city, state or country or the globe.
Businesses can be classified as

Question 4

types of geographical spreads

Answer 4

1. Local – operate and sell to a small geographical region within Australia
   pottery green
2. National – operate and sell throughout Australia but within national boundary
   Woolworths, coles
3. Global –a large company that has branches in many different countries. For such companies, national borders do not represent trade barriers.
   apple, aldi

Question 5

what are the industry sectors?

(PS - TQQ)

Answer 5

Primary
Secondary
Tertiary
Quaternary
Quinary

Question 6

primary sector

Answer 6

Primary industry – involved in the growing, harvesting and extracting of raw materials.

Examples of these businesses include all types of farming, mining, fishing, grazing and forestry

Question 7

secondary sector

Answer 7

Secondary industry – processing of raw materials into finished products

examples
Car manufacturers

Question 8

tertiary sector

Answer 8

Tertiary industry – provision of services
(account for 75% of Australian economy).

Examples
retailers, banks, health workers

Question 9

quaternary sector

Answer 9

Quaternary – focus on providing information services (transfer and processing of information and knowledge)

Examples:
telecommunication, property, computing, finance and education

Question 10

quinary

Answer 10

Quinary – focus on providing domestic services (services that have traditionally been performed in the home).

Examples
hospitality, tourism, craft-based activities and childcare

Question 11

legal structure

Answer 11

1. sole trader
2. partnership
3. private company
4. public company

Question 12

what is a sole trader?

Answer 12

A sole trader is a business that is owned and operated by one person

Question 13

advantages of being a sole trader

Answer 13

• Low cost of entry
  -Simplest form
  -complete control
  -No partner disputes

Question 14

disadvantages of being a sole trader

Answer 14

-personal (unlimited) liability for business debts
-difficult to operate if sick
-need to carry all losses
-need to perform wide variety of tasks

Question 15

what is partnership

Answer 15

A partnership is a legal business structure that is owned and operated by between two and 20 people.

Question 16

advantages of partnership

Answer 16

-low start-up costs
-less costly to operate
-shared responsibility and workload

Question 17

disadvantages of partnership

Answer 17

-personal unlimited liability
- the possibility of disputes

Question 18

what is private company

Answer 18

A proprietary (private) company is the most common.
Usually has between two and 50 private shareholders. A private company must have the words ‘proprietary limited’, abbreviated to ‘Pty Ltd’, after its name

Question 19

advantages of a private company

Answer 19

 limited liability
 Perpetual succession
 Can sell shares

Question 20

disadvantages of a private company

Answer 20

1. cost of formation

Question 21

what is a public company?

Answer 21

The shares for public companies are listed on the Australian Securities Exchange, and the general public may buy and sell shares in those companies. Examples include, JB-HI-FI, Qantas, Nab, CBA

Question 22

advantages of a public company

Answer 22

 Limited liability
 Perpetual succession
 unlimited shareholders
 can sell shares on AEX

Question 23

disadvantages of a public company

Answer 23

1. cost
2. to publish its audited financial accounts each year, its annual report

Question 24

franchise

Answer 24

A franchise agreement allows an investor to buy an existing business’ name and distribute goods and services

Franchisor – a business allowing investors to use its name and products

Franchisee – business buying the rights to use the name and products

Question 25

advantages of franchise

Answer 25

Established business name
Existing customer base
Existing product range
Proven business model
Initial start-up support provided

Question 26

disadvantage of franchise

Answer 26

Expensive to buy into
Must pay a portion of profits to franchisor
Hard to make changes to goods and services
Business can be taken from you if you do not follow the franchise agreement

Question 27

what is unlimited liability?

Question 28

what is limited liability

Question 29

factors influencing the choice of legal structure

Answer 29

1. size
2. ownership
3. finance