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Accounting - Semester 1 Exam > Topic 1b - Types of small businesses > Flashcards

Topic 1b - Types of small businesses Flashcards

1
Q

Types of small businesses

A
  1. sole trader
  2. partnership
  3. small proprietary company
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2
Q

sole trader

A

a business owned by one person

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3
Q

Number of owners: sole trader

A

1

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4
Q

Liability of owners: sole trader

A

Unlimited liability

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5
Q

Ability to raise capital or raise funds: sole trader

A

Owner investment, hard to find investors

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6
Q

Distribution of profits: sole trader

A

Owner gets full distribution of money

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7
Q

Transfer of ownership: sole trader

A

Cannot transfer ownership

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8
Q

Continuity of existence: Sole trader

A

If anything happens to one owner, business ceases to exist

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9
Q

Separate accounting or legal entity: Sole trader

A

Not a separate legal entity

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10
Q

Advantages: Sole trader

A

Easy to establish
Does not have to share profit

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11
Q

Disadvantages: Sole trader

A

Liable for all debts
One person may not have enough money
Losses cannot be shared

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12
Q

partnership

A

a business, other than a company, that is owned by 2 or more people.

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13
Q

Number of owners: Partnership

A

2-20

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14
Q

Liability of owners: Partnership

A

Unlimited liability

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15
Q

Ability to raise capital or raise funds: Partnership

A

Owners investments. A lot easier with more owners

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16
Q

Distribution of profits: Partnership

A

Goes to different owners according to partnership agreement or act (form of drawings)

17
Q

Transfer of ownership: Partnership

A

partners must agree to transfer ownership (partnership agreement)

18
Q

Separate accounting or legal entity: partnership

A

Either separate, or not separate

19
Q

Continuity of existence: Partnership

A

If 2 OG owners: ceases to exist
If 2+ OG owners: new partnership agreement, continues to exist
If new partner joins: new partnership agreement occurs

20
Q

Advantages: Partnership

A

Can raise more capital
Contribute more skills
Share the workload

21
Q

Disadvantages: Partnership

A

Profit must be shared
Conflict over how business is run may occur

22
Q

Small proprietary company

A

a proprietary company is a company that cannot raise money for the public. must have at least 1 shareholder and a maximum of 50 non employee shareholders.

23
Q

small proprietary company must satisfy any 2 of the 3 following conditions

A
  1. yearly income is less than $25million
  2. the assets at the end of a year are less than $12.5 million
  3. the company has less than 50 employees at the end of the year
24
Q

Number of owners: Small proprietary company

A

1-50 non employee shareholders

25
Q

Liability of owners: Small proprietary company

A

Limited liability

26
Q

Ability to raise capital or raise funds: Small proprietary company

A

Raise capital through shareholders

27
Q

Distribution of profits: Small proprietary company

A

Goes to different shareholders in the form of dividends

28
Q

Transfer of ownership: Small proprietary company

A

constitution can include a clause that restricts the right of shareholders to transfer their shares to a new owner

29
Q

Separate accounting or legal entity: Small proprietary company

A

Separate legal entity, company sues not the owner

30
Q

Continuity of existence: Small proprietary business

A

Company continues to exist

31
Q

Advantages: Small proprietary company

A

Death of a shareholder makes no difference
Limited liability

32
Q

Disadvantages: Small proprietary company

A

Greater regulation
More expensive to form

33
Q

partnership agreement includes

A
  • aims of partnership
  • profit or loss sharing ratio
  • voting procedures at meetings of partners
  • procedures for retirement, death, new partner

Accounting - Semester 1 Exam (7 decks)

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