AOS 1: Types of Businesses Flashcards
What is a business?
An organisation where goods and/or services are exchanged for money.
What is a Sole Trader?
A business owned and operated by one person.
Characteristics of Sole Trader.
- Owner and business have the same legal entity.
- Unlimited liability.
Advantages of Sole Trader
- Simple and inexpensive to set up.
- Owners have complete control.
-Minimal government regulations. - Owner keeps all profits.
Disadvantages of Sole Trader.
- Unlimited liability.
- Harder to gain finance.
- Burden of managing business.
- Heavily reliant on owners skills.
What is a Partnership?
A business that is owned by two to twenty people.
Characteristics of a Partnership.
- Owners and business have the same legal identity.
- Owners have unlimited liability.
Advantages of a Partnership.
- Simple and inexpensive to set up.
- Shared workload.
- Shared debt.
- Variety of skills and expertise by owners.
Disadvantages of a Partnership.
- Unlimited liability.
- Potential for disagreements.
- Shared profits.
What is a company?
A business structure that goes through incorporation.
Characteristics of a company.
- Is owned by shares.
- Seperate legal entity.
- Limited liability.
What is a Private Limited Company?
An incorporated business that is owned by up to 50 private shareholders.
Characteristics of a Private Limited Company.
- Not listed on stock exchange.
- Restrictions on who can buy shares.
- Seperate legal entity.
- Perpetuity.
Advantages of a Private Limited Company.
- Limited liability.
- Pay company tax rate.
- Perpetuity.
- Easier to attract more capital.
Disadvantages of a Private Limited Company.
- Shares cannot be traded freely.
- Complex and expensive to set up.
- More reporting requirements to the owners and the government.
What is a Public Listed Company?
Is a company owned by shareholders where the shares of the business can be purchased or sold on an open market such as the Australian Securities Exchange (ASX).
Characteristics of a Public Listed Company.
- Listed on stock exchange.
- Share can be purchased by the public.
- Seperate legal entity.
- Perpetuity.
Advantages of a Public Listed Company.
- Limited liability.
- Pay Company tax rate.
- Perpetuity.
- Easier to attract more campital by selling more shares to the public.
