3.1.1 types of businesses Flashcards
four advantageous of a sole trader
The owner has full control and
decision-making power.
There is a low risk of disputes as
there is only one owner making
decisions.
easy to register and set up.
Other owners do not need to be
consulted when making decisions,
therefore decision-making
can be quick.
sole trader
A sole trader is a
business structure that is
owned and operated by
one individual.
four disadvantageous of a sole trader
Unlimited liability puts the owner’s
personal assets at risk, as they can
be seized to pay off business debts.
The knowledge and skills are
limited to the owner, meaning the
owner may not have appropriate
expertise in various areas.
The life of the business ends when
the owner dies.
It may be difficult to take time off
work for holidays or when sick, as
no one else can operate the business.
partnership
A partnership is a
business structure that
is owned by two to 20
owners.
four advantageous of a partnership
Greater range of expertise and
ideas amongst numerous partners.
The financial and legal risks are
shared between partners.
Owners can share the workload and
take time off as there are multiple
people that can manage the business.
Easy and simple to register
and set up.
four disadvantageous of partnership
Unlimited liability means that the
partners’ personal assets are at
risk, as they can be seized to pay off
business debts.
Conflicts could arise due to shared
decision-making and personality
clashes amongst partners.
If one partner leaves, it could be
time-consuming to restructure the
partnership.
Profit needs to be shared between
the partners.
private limited company
A private limited company
is an incorporated
business structure that
has at least one director
and a maximum of 50
shareholders.
four advantageous of a private limited company
There is limited liability for
shareholders.
There is a greater variety of
expertise and ideas as more people
are involved.
The business’s existence is not
threatened by the removal of
one director.
Since incorporated businesses have
greater access to capital, banks
are more inclined to provide them
with loans.
four disadvantageous of a private limited company
Complex reporting requirements,
such as annual reports, need to be
published for shareholders.
It is difficult to change structure
once a company has been
established.
It is complex to establish, as the
setup process requires more time.
Increased reporting requirements
and government regulation.
public listed company
A public listed company
is an incorporated
business that has an
unlimited number of
shareholders and lists and
sells its shares on the ASX
four advantageous of a public listed company
Shareholders have limited liability.
There is greater access to
expertise and ideas as more people
are involved.
No permission is needed to trade
and sell shares.
The life of the company can live
longer than the directors.
four disadvantageous of a public listed company
Conflicts could arise through shared
decision-making between directors.
There are complex reporting
requirements, such as annual
financial reports, that need to be
published to the public.
Greater time taken to set up as it is
a complex business structure.
Producing annual financial reports
can be a time-consuming process.
social enterprise
A social enterprise is a
type of business that aims
to fulfil a community or
environmental need by
selling goods or services.
four advantageous of a social enterprise
The community benefits from the
business’s activities.
The business can develop a positive
reputation as they are helping and
contributing to society.
Employees have purposeful work
so they are more likely to be
satisfied with their job.
Likely to receive financial support
from other businesses and the
government as they have a positive
social mission.
two disadvantageous of a social enterprise
Difficult to balance the
achievement of financial objectives
with social objectives.
May be difficult to obtain a bank
loan as the business does not solely
focus on financial objectives.
government business enterprise
A government business
enterprise (GBE) is a
business that is owned
and operated by the
government.
four advantageous of a government business enterprise
Delivers goods and services that
help the community and the
community’s needs.
Provides healthy competition to the
private sector.
GBEs can operate with some
independence from the government.
GBEs provide services that the
private sector would hesitate to
invest in.
four disadvantageous of a government business enterprise
GBEs have to follow significant ‘red
tape’, which refers to excessive rules
and formalities, compromising how
quickly GBEs can do things.
Productivity may be lower than
private-sector businesses as there
tends to be a lack of accountability
in the public sector.
Governments and politicians can
interfere and change the strategic
direction of the business.
