FOBO

Question 1

Define Sole Trader

Answer 1

Business owned by a single person (but may have many employees)

Question 2

6 advantages of Sole Trader

Answer 2

• Simplicity
• Single Layer of Tax
• Privacy
• Flexibility & Control
• Fewer Limits on personal income
• Personal satisfaction

Question 3

6 DISadvantages of Sole Trader

Answer 3

• Financial liability
• Demands on owner
• limited managerial perspective
• Resource limitation
• No employee benefits for owner
• Finite life span

Question 4

Define partnership

Answer 4

A company that is owned by 2+ people but it not a corporation

Question 5

Define general partnership

Answer 5

All partners have joint authority to make decisions & joint liability for firm’s financial obligations

Question 6

Define Limited partnership

Answer 6

1+ people act as general partners who = run the business & have same unlimited liability as STs

Remaining owners = limited partners (aka silent/sleeping)
≠ participate in running business

Limited liability → maximum they are liable for = whatever amount each invested in business

Question 7

5 advantages of partnership

Answer 7

• simplicity
• single layer of tax
• more resources
• cost sharing
• broader skill & experience base

Question 8

3 disadvantages for partnership

Answer 8

• Unlimited liability
• potential for conflict
• limited life

Question 9

Define corporation

Answer 9

Legal entity, distinct from any individual persons, that has the power to own property & conduct business

Owned by shareholders

2 types (public & private)

Question 10

Define Public corporation

Answer 10

Shares are sold to anyone who has the means to buy them — eg individuals, investment companies (eg superannuation funds), non-profit orgs & other companies

These types = said to be publicly held or publicly traded

Question 11

Define private corporation

Answer 11

Corp where all shares are owned by only a few individuals or companies (max of 50 shareholders) & ≠ available for purchase by the public

Aka proprietary company (‘Pty’)

Private corps can be limited liability (‘Pty ltd’) or unlimited (‘Pty’)

Question 12

4 Types of public companies

Answer 12

• Public companies limited by shares
• Public companies limited by guarantee
• Unlimited public companies
• No liability companies

Question 13

Define Public companies limited by shares

Answer 13

Company where the liability of the shareholders is limited to the issue price of their fully paid shares.

aka a limited liability companies
usually denoted by ‘Ltd’

Question 14

Define Public companies limited by guarantee

Answer 14

Form = common for charitable & not-for-profit organisation

In case the company is wound up → the liability of the shareholders = limited to the amount they agreed to contribute

Question 15

Define Unlimited public companies

Answer 15

usually common for professional & investment-type companies

The liability of the shareholders to the debts of the company = unlimited

Question 16

Define No liability companies

Answer 16

In Aus = restricted to mining & resources companies bc of the high risk shareholders face when investing

Shares issued by a no-liability company = commonly on a partly paid basis.

Shareholders have no liability to pay any future calls on their partly paid shares but by doing so they forfeit those shares

Question 17

4 advantages of corporations

Answer 17

• Ability to raise capital
• Liquidity
• longevity
• limited liability

Question 18

6 disadvantages of corps

Answer 18

• Cost & complexity
• Reporting requirements
• Managerial demands
• Possible loss of control
• Double taxation
• Short term orientation of the stock market