Types of business Flashcards
What is a sole trader?
A sole trader is a business structure that is owned and operated by one individual. - and unincorporated A legal status of a business where the owner and business are viewed as the same legal entity**
A sole trader is unincorporated, meaning the owner and business are viewed as the same legal entity.
What are the advantages of being a sole trader?
- Owner has total control
- Simple and inexpensive
- No potential disputes with other owners/partners
What are the disadvantages of being a sole trader?
- Harder to get finance
- Unlimited liability
- Reliant on owner’s own knowledge and skills
Unlimited liability is the personal legal responsibility a business owner has for an unincorporated business’s debts.
What is a partnership?
A partnership is a business structure that is owned by two to 20 owners.
What are the advantages of a partnership?
- Simple and inexpensive
- Financial & legal risk is shared
- Offers broader access to capital, knowledge, skills, and experience
- Taxation is calculated on personal income of partners
What are the disadvantages of a partnership?
- Conflicts can arise
- Unlimited liability
- Business could be threatened by one partner leaving (i.e., no perpetuity)
- Difficulty in finding suitable partners
What is a private limited company (Pty Ltd)?
A private limited company is an incorporated business structure that has at least one director and a maximum of 50 shareholders. And Incorporated. Refers to the legal status of a company whereby the company is established as a separate legal entity to the shareholders
What are the characteristics of a private limited company?
- 1 – 50 shareholders
- Incorporated
- Has 1+ director
- Shares trade with permission of other shareholders
What are the advantages of a private limited company?
- Limited liability
- Separate legal entity
- Extra capital can be obtained by issuing more shares
What are the disadvantages of a private limited company?
- Complex to establish
- More government control
- Higher establishment costs
Limited liability means shareholders are only liable to the extent of their original investment.
What is a public listed company (Ltd)?
A public listed company is an incorporated business that has an unlimited number of shareholders and lists and sells its shares on the ASX.
What are the advantages of a public listed company?
- Limited liability
- Separate legal entity
- Able to gain extra capital through selling extra shares
What are the disadvantages of a public listed company?
- Complex to establish
- More accountability
- High establishment costs
What is a social enterprise?
A social enterprise is a type of business that aims to fulfil a community or environmental need by selling goods or services.
What are the advantages of a social enterprise?
- Community benefits
- Employees have purposeful work
- Innovative and sustainable
What are the disadvantages of a social enterprise?
- Difficulties to balance financial and social objectives
- Might be difficult to obtain finance
- Non-profit may not be the most efficient/productive business structure
What is a government business enterprise (GBE)?
A government business enterprise is a business that is owned and operated by the government.
What are the advantages of a government business enterprise?
- Provides services that private sector might not want to invest in
- Delivers community needs
What are the disadvantages of a government business enterprise?
- Government and politicians can interfere with strategic decisions
- Productivity may be slower than private due to lots of red tape
