legal structures

Question 1

what is a sole trader?

Answer 1

operated by one person

Question 2

advantages of a sole trader?

Answer 2

low cost, complete control, owner has a right to all profits.

Question 3

disadvantages of a sole trader?

Answer 3

unlimited liability, must perform a wide range of tasks, difficult to raise finance, carries all losses.

Question 4

what is a partnership business?

Answer 4

operated by 2-20 different owners

Question 5

advantages of a partnership?

Answer 5

low startup costs, shared workload and risk, business continues after death of one partner.

Question 6

disadvantages of a partnership?

Answer 6

liability for all debts (incl. partners), divided loyalty and authority, and possible disputes.

Question 7

what is a private company?

Answer 7

an incorporated business with limited liability, with 2-50 private shareholders

Question 8

advantages of a private company?

Answer 8

shareholders have limited liability protection; shareholders need director approval; can transfer ownership easily.

Question 9

disadvantages of a private company?

Answer 9

access to finance and difficult to close, cost of formation.

Question 10

what is a public company?

Answer 10

Shares are offered freely on the Australian Securities Exchange (ASX) and must have a minimum of 1 shareholder. Shareholders are the public.

Question 11

advantages of a public company?

Answer 11

unlimited amount of shareholders, limited liability protection, shares bought freely and sold, more access to capital (money funding)

Question 12

disadvantages of a public company?

Answer 12

complex and costly process, may be too big or slow to make change.