business structures

Question 1

what are 3 types of business

Answer 1

1. manufacturing
2. retail/trading
3. services

Question 2

show the relationship of a retailer

Answer 2

manufacturer —> retailer —> consumer

manufacturer gives retailer finished goods, retailer sells finished goods to consumers

Question 3

show the service relationship

Answer 3

service business —> consumer

services provide consumers with expertise, time, labour

Question 4

describe sole proprietorship

Answer 4

owned by 1 person and operates their business in their own right under their name or a registered business name.

Advantages:
- easy and cheap to set up
- full control over decision making
- receives all profits and has access to capital of business
- simple and easy to sell

disadvantages:
- unlimited liability
- limited access to funds
- owner skills may be limited
- working long hours, increased stress

Question 5

describe partnership

Answer 5

owned by 2 or more people with view of making profit.

advantages:
- cheap and easy to set up
- simple to wind up and reclaim individual investment
- greater access to capital funds and skills
- tax advantage: profit can be split between marriage partners, reduces tax debt

disadvantages:
- decision making is split, may lead to disagreements
- unlimited liability
- partnership has a limited life
- profits are shared

Question 6

describe proprietary (private) company (Pty Ltd)

Answer 6

a business that exists as a seperate legal entity that is entitled to do business.

advantages:
- limited liability
- greater ability to attract capital
- life of business is ongoing
- can conduct business Australia wide

disadvantages:
- establishment cost are higher
- higher compliance costs
- seperate tax return required
- difficult to attract additional capital as they can’t publicly advertise for funds

Question 7

compare private and public companies