types of businesses

Question 1

define sole trade

Answer 1

a sole trader is a business where one person has complete ownership and makes all of the decisions for the business, therefore keeps all of the net profits.

Question 2

sole trader characteristics

Answer 2

• the business and the owner have the same legal entity.
• the owner has unlimited liability
• must have an ABN

Question 3

sole trader advantages

Answer 3

• simple and inexpensive to set up
• owner has complete control
• no dispute with partners
• less government regulation
• the owner keeps all net profits

Question 4

sole trader disadvantages

Answer 4

• unlimited liability
• more difficult to gain finance
• take 100% responsibility and financial risk
• heavy reliance on owner’s skills

Question 5

define partnership

Answer 5

a partnership is where there are two or more owners of a business. Most partnerships have a maximum of 20 owners.

Question 6

partnership example

Answer 6

coastal plastic surgery

Question 7

partnerships allowed more owners

Answer 7

• medical practitioners 50
• chemists 100
• accountants 400

Question 8

partnership characteristics

Answer 8

• owners have unlimited liability
• may have silent owners
• can have official partnership agreements to minimize disputes between partners.

Question 9

what is a silent owner

Answer 9

contributes financially but has no part in managing the business

Question 10

partnership advantages

Answer 10

• simple and inexpensive to set up
• workload can be shared
• greater pool of experience
• financial risk is shared

Question 11

partnership disadvantages

Answer 11

• unlimited liability
• profits are divided among partners
• potential for disagreements between partners
• may be difficult to remove a partner

Question 12

define private limited company

Answer 12

They have at least one shareholder and a maximum of 50 non-employee shareholders. These companies also require a minimum of 1 director.

Question 13

private limited company characteristics

Answer 13

• must have at least 1 director, who makes decisions on behalf of shareholders
• shares cannot be freely sold or traded to the public
• a private company will have ‘Pty. Ltd.’ at the end of it’s name

Question 14

private limited company advantages

Answer 14

• limited liability for shareholders
• potentially a greater ability to raise capital
• potential tax benefits
• perpetuity

Question 15

private limited company disadvantages

Answer 15

-more complex and expensive to establish
-more reporting requirements to owners and government
-shares cannot be freely traded
-less liquidity for shareholders compared to public companies

Question 16

define public listed company

Answer 16

these companies’ shares are listed on a public exchange, and the general public may buy and sell shares of this type of company. These companies have no maximum amount of shareholders.

Question 17

public listed company characteristics

Answer 17

• listed on a public exchange
• shares can be freely traded to the public
• IPO- initial public offering is when a company first lists on an exchange

Question 18

public listed company advantages

Answer 18

-limited liability for shareholders
-greater ability to raise capital through the sale of shares
-perpetuity
-greater liquidity for shareholders

Question 19

public listed company disadvantages

Answer 19

-very complex and expensive to establish
-greater reporting requirements
-no control over who buys shares

Question 20

define social enterprise

Answer 20

A business that produces goods and services for the market, but operates with the primary objective of fulfilling social needs.
Most (but not all) profit made will be reinvested into the company or a cause.

Question 21

social enterprise characteristics

Answer 21

• primary aim to address and improve a social or community cause
• profits are primarily used towards the social issue they are aiming to improve.
• some social enterprises may rely on government grants or other donations.

Question 22

social enterprise advantages

Answer 22

-may attract customers due to their belief in the cause
-can improve employee morale as the employees are contributing to a worthy cause

Question 23

social enterprise disadvantages

Answer 23

-difficult to focus on profits while also focusing on the social cause
-may need to constantly work with light budgets, making it more difficult to compete

Question 24

define GBE

Answer 24

a type of business that is government-owned and operated. Like companies, GBEs participate in commercial activities to make a profit.

Question 25

who are GBEs managed/controlled by?

Answer 25

normally controlled by a board of directors

Question 26

GBE advantages

Answer 26

-able to offer services to the community that other businesses may not find financially desirable
-can help provide competition to the market, benefiting customers

Question 27

GBE disadvantages

Answer 27

-objectives and funding may change with the change of government
-political views may interfere with the sales

Question 28

what is the most common type of company structure in Australia?

Answer 28

private limited company

Question 29

define perpetuity

Answer 29

life of the company can live longer than the directors

Question 30

sole trader eg

Answer 30

freelancers, people that work for themselves.

Question 31

private limited eg

Answer 31

IKEA & LEGO

Question 32

public listed eg

Answer 32

Apple & Amazon

Question 33

GBE eg

Answer 33

Australian Post

Question 34

social enterprise eg

Answer 34

Thankyou.

Question 35

what is liquidity?

Answer 35

a measure of the difficulty to sell something ( in this case; shares)