Business Foundations Flashcards
Business
any activity conducted by individual or individuals to produce and sell goods and services that satisfy the needs of society, as well as make a profit.
Type of Business
stakeholder, Government business Enterprise, partnership, Companies-private and public, and social enterprise.
Unlimited liability
refers to when a business owner is personally responsible for all debts of the business.
–> applies to sole trader and partnership
sole trader
Business owned and operated by one person
–>The owner may still employ other employees, but the owner is solely responsible for making all decisions and providing all the finances required to operate
disadvantage and advantage of sole trader
advantage:
have control over business
keeps profit
cheaper to set up
disadvantages:
Unlimited liability
harder to gain finance for expansion
increase workload, stress, the owner need to do a lot of tasks
partnership
a business owned by two or more people (generally a maximum of 20)
-agreement can be made verbally or in writing. In the case of disputes it is good to have the agreement formalised
Disadvantage and advantage of partnership
advantages:
low start-up cost
shared responsibility, workload and risk
more funds and talents
business continues after one of owner dies
disadvantages
disputes
unlimited liability
profit is split
Incorporation
the process that businesses go through to become a registered company and separate legal entity from owners and shareholders
Benefits:
limited liability-If the company goes into LIQUDATION the shareholders are not forced to sell their personal asset to pay for debt of business.
Incorparation: Private limited Company
an incorporated business that has a minimum of one shareholder and a maximum of 50 non-employee shareholders
factors of private company
-shares tend to be offered only to ppl that the business wishes to have as part of owners, tend to be small-meidum sized business, families,
-must have one director
advantages and disadvatge of private company
PROS
easier to attract finance
limited liability
easy to transfer ownership
growth potential
CONS
more costly to set up
company taxed on profit
required to produces audited annual reports
personal liability of owners asset if director knew debts could not be paid off
Incorporation: Public listed company
an incoraprate business withba minimum of one shareholder (no maximum) and whose shares are traded on Aus security exchange.
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Characteristics of a Public Company
-Requirement of three directors
-Requirement to publish audited -financial accounts each year in its annual report
pros and cons public company
pros
attract finance
growth
cons
much more complex structure and more accountability and compliance with laws and regulations
social enterprise
Businesses with the objective of fulfilling social needs
-opportunities for unemployed
-developing skills for disadvantaged ppl
-enviornemnt
-provide essential services for disadvantaged ppl
