Establishing a proffessional practic Flashcards
Who should you discuss your ideas and proposols to before starting a buisness
- -accountant -solicitor -bank manager/ financial advisor -real estate agent and an architect if appropriate
What are the potential advantages of owning your own buisness?
-repeaing rewards of your own efforts, with potential to earn more in the long run -independance and freedom: enjoy more control over what you do and when you do it. -The choice between working full time or part time: you can set your own hours, and so potentialy enjoy a better work/life balance. -improved quality of life and job satisfaction, maybe cuts daily commuye. avoids office politics, be able to focus on aspect of your coreer you enjoy most.
Potential disadvantages
-more stress and responsibility for success ir failure lies with you: responsible for losses as well as profits -you have no paid holiday or sick leave -you are likely to earn less in the short term -no one to manage you, keep you on track or provide motivation or moral support. -less time with family as buisness commitments means you work long hours -isolation from collegues or customers -responsibility for your own tax, and with no company pension scheme you have to make your own arrangements.
List the start up requirements of your own buisness
- establish a legal entity and register a Australian Buisness Number. -identify a suitable premises -find out about permits, liscening, rule regulations etc -locate supplers if applicable -determine what record you need to comply with for government agencies -identify what risks you will be exposed to and what insurance covers you will need.
What is a sole proprietorship/ trade and what is its advantages and disadvantages?
-a person who owns and manages a buisness on their own, either under a buisness name or their own name, -This is good when buisness is small and capital investment is minimal -simplest easiest structure, cheapest structure -the sold trader is responsible for all proficts, debts and acts of negligence -the sole proprietorship is automatically terminated with death/ incapacity of the owner. Advantages: -owner has complete control of buisness and profits -easy to establish -low start- up costs -simple to operate -maximum privacy -easy to wind up/ sell if desired without requiring the consent of others. Disadvantages: -unlimited liability for debts (no legal distiniction between buisness and private assets) -limited capacity to raise capital -you make all of day-to-day decisions -taking holidays can be difficult -life of buisness is limited -taxed as a single person -buisness development is limited to expertise and capabilities of the owner.
PARTNERSHIP: What is it? adv, disad
It is an agreement between two and up to 20 people, to carry on a buisness together for a profit, with the partnes each contributing time, talent, money and undertaking and sharing the management responsibility. It must be a continuing, not a one-off ventur . -it should be established through a formal, contractural arrangments. -may trade under a buisness name orf the names of the partners. -they are appropriate where the numbet of persons involved is small and the degree of risk in the venturte is such that limited liability is not considered necessary. -must be a formal agreements, were they decide on the distribution of capital and profits. (if there is no agreement- they are entitled to equal profits, and also contribution, losses and debts incured) -partners have equal rights to: -profits, capital, managment decisions Advantages: -easy to establish -low start up-costs -more capital is available -greater borrowing capacity -high clibre employees can be made partners -good tax savings -privacy of partners buisness affairs -limited external regulation -easy to change legal structure later -wider pool of expertise is available -partners can decide how the profits can be shared. Disadvantages: -They have a life that lasts only as long as the original partners -liability of partners debts is unlimited -each partner is jointly liable for partnership debts -risk of disagreement and friction among partners and management. -trasfer of ownership is complicated and taking on a new partner requires consent of all parties. -if partner join or leave, you will have to value all partnership assets and this can be costly. -death and bankrupsy dissolves a partnership, if the venture is to continue it must be reformed.
PROPRIETRY COMPANY What is it? What are the laws behind it? What are the minimum requirments Duties of a company director
Set up under a formal agreement and gives the company a seperate identity (legal entity) from the people who can own and manage the buisness. -By law a company is like a person with its own right, legal and financial obligations that a person might have -it is owed a duty of care by the people hwo operate the buissness. -company is owned by shareholders but run by directors -there must be systematic recording of companies financial transactions -The name must include Propriety limited. -A single petson company needs only one shareholder and one director who can be same person - this company can also be a shaoreholder and a director. Minimum requirments: pcompany may be formed by one or more people who must be older than 18yrs of age. -company must have at least 1 shareholder and it may have more than one director -shareholders may oalso be directprs and company secretaries. -there are residency laws that must be met, with at least one director normally resident in Aus -people who have undisharged bankrupcy, or commited any offences cant form a company. Advantages: -your liability for the companys debts is limited -the personal assets of shareholders arent threatened by company losses or debts exceot were shareholders are guarentors for the performance of the company. -Sharholders (often family members) can be employed by the company. -a company is managed by appointed by ddirectors, secretaries and managers- all whom have set responsibilities -taxation rates are more favourable -access to a wider capital and skills base -transfer of company ownership may be simple process and company doesnt have to be wound up upon disability, death, or retirment of persons involved. Disadvantages: -formation of compant requies legal and accounting advice -more complicated and expensive to establish and maintain -costly to wind up -scrutiny of your financial affairs -prosecution and fines for failing to comply with the Law.
The hallmark features of a proprietry company are:
-restrictions on the right to transfer shares to new shareholders -a limited number of shareholders -a prohibition on inviting memes of general public to aquire shares. A s
Trust
Is formed when a business is transferred to a trustee to hold the assets, to run the business, distribute income to beneficiaries and observe the provisions in the trust deed. Not a legal entity. Often chosen where more than one family is involved in running the business. Advantages Flexibility Continuity can be preserved Limited liability is possible by appointing a corporate trustee. More privacy than a company. Flexibility in distributions among beneficiaries. Trust income is generally taxed in the hands of individuals. Powers restricted to trust deed. Disadvantages More complex structure. Expensive to establish and maintain. Problems can be encountered when borrowing. Limited life of trust deed Trustee subject to Trustee Act
Buisness name: must be registered with who? Whats it important for?
The name you choose is important for commercial (marketing) and legal (obligation) reasons. -registering your buisness name doesnt give you ownershup or propriety rights to the name. You must register your name in all categories if you wish to secure the name. -When you decide on a name you should check categories of names to ensure its available. To summaries unless you carry on business under your own name (or joint names of yourself and partners), the name of the business must be registered. Registration is not required where the business name consists of the surname(s) of the person(s) conducting the business, with first names or initials or a combination of these, provided there is no addition of any other word or words.
Criteria to help you decide name
s the name easy to read? Is it easy to remember? Does the name lend itself to visual media? Is it easy to say? Does it roll off the tongue when answering the telephone? Does the name convey to potential customers the scope and nature of your business? Is it likely to be durable through changing climates of opinion? Does it portray a symbol of quality, service and reliability? Is the name likely to be too restrictive (e.g. geographic names tying the business to a particular region) if services or the direction of the business change at a later date?
Domain name
This is the name and address of an internet site. Domain names are administered by .au Domain Administration Limited (auDA). Registration gives you the exclusive use of the address of an agreed period of time.
Trade mark
A trade mark is a letter, number, word, phrase, sound, smell, colour, shape, logo, picture, aspect of packaging, or any combination of these that identifies and distinguishes a business, product or service from similar business, products or services. Trademarks are administered by IP Australia, which provides exclusive use of the trademark within Australia.
What are the other things that you MUST Register your buisness for?
an Australian Business Number (ABN) the Goods and Services Tax (GST) a Tax File Number (TFN) Pay as you go (PAYG) withholding.
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