1.1 Types Of Businesses Flashcards
Sole Trader
- one person owns and operates the entire business, provides all finance, makes all decisions, takes all responsibility
- not regarded as a separate legal entity from the business
advantages: low entry costs, simplest form, complete control, no partner disputes
disadvantages: personal liability, business ends at owner death, carry all losses, burden of management, heavy work load
Partnership
owned by 2 or more people, maximum 20, not seperate legal entities from the business
advantages: low start up costs, less costly to operate, shared workload/responsibility, pooled funds and talent
disadvantages: personal liability, possibility for disputes, difficulty finding suitable partner, divided loyalty and authority
Private Limited Company
- at least one shareholder, maximum of 50 non-employee shareholders, at least one director
- most common company structure in Australia
advantages: easier to attract finances, separate legal entities, easy transfer of ownership
disadvantages: cost of formation, company taxed on any profits, public disclosure
Public Listed Company
- incorporated business, minimum of one shareholder with no maximum
- shares openly traded on ASE
advantages: easier to attract finances, separate legal entities, easy transfer of ownership
disadvantages: cost of formation, company taxed on any profits, public disclosure
Social Enterprise
- produces goods/services for the market, primary objective of fulfilling a social need
- run like a commercial business
advantages: can open new markets, meeting a social need can have a positive effect on profit and market share
disadvantages: significant operating costs, difficulty obtaining capital to start the business, difficult to focus on social/financial objectives
Government Business Enterprise (GBE)
- business is government owned and operated
- aim to increase value in their assets and returns to shareholders (being the government)
- participate in commercial activities, goal of profit
advantages: can operate with some government independence, able to carry out government policies
disadvantages: political interference in day-to-day, inefficiencies caused by government ‘red tape’
