Types of Businesses Flashcards
What are the five common methods used to classify a business?
Legal structure
Size
Geographical spread
Industry sector
Public and private sector ownership
What is the difference between public and private sector ownership?
Public sector: Owned by the government (e.g. Australia Post)
Private sector: Owned by individuals or private groups (e.g. Woolworths)
How are businesses classified by size based on employee numbers?
Micro business: Less than 5 employees
Small business: 5–19 employees
Medium business: 20–199 employees
Large business: 200 or more employees
- What does the ABS define as a large business?
A business with more than $200 million in annual turnover.
- What does the ATO define as a small business?
A business with less than $10 million in annual turnover.
- What does the ATO define as a large business?
A business with more than $250 million in annual turnover.
- What are quantitative measures used to classify business size?
Number of employees and owners
Market share
Legal structure
Amount of assets owned
Annual turnover
- What are qualitative measures used to classify business size?
Decision-making processes
Influence in the market
- What are some examples of micro, small, medium, and large businesses?
Micro: Photographer
Small: Barber, Plumber
Medium: Motel, School
Large: Woolworths, Qantas, ANZ
- How are businesses classified by geographical spread?
Local: Operates in a small area (e.g. Café)
National: Operates across one country (e.g. Kmart, Bunnings)
Global: Operates in multiple countries (e.g. McDonald’s, Coca-Cola)
- What are some pros and cons of local businesses?
Pros: Lower costs, know your customers
Cons: Hard to expand, reliant on word of mouth
- What are some pros and cons of national businesses?
Pros: Recognised nationwide, easier to grow
Cons: Financial pressures, long work hours
- What are some pros and cons of global businesses?
Pros: Brand recognition, high profits
Cons: High risk of failure, demand/supply issues
- What are the five industry sectors used to classify businesses?
Primary – Raw material collection (e.g. farming)
Secondary – Manufacturing and production
Tertiary – Providing services (e.g. retail)
Quaternary – Information and knowledge-based services
Quinary – Domestic and personal services (e.g. childcare)
- What is incorporation in business?
It is the process of becoming a separate legal entity from the owner.
- What are incorporated business entities?
Businesses like private and public companies that are legally separate from their owners and have limited liability.
- What are the features of a sole trader business?
Owned by one person
Low start-up cost
Tax on personal income only
Ends when owner dies
Unlimited liability
- What are unincorporated business entities?
Businesses like sole traders and partnerships where the owner is personally liable for all debts (unlimited liability).
- What are the features of a partnership?
Owned by 2–20 people
Shared responsibilities and costs
Unlimited liability
- What is a private company?
Shares are not publicly traded
Has 1 to 50 shareholders
Smaller management structure
What is a public company?
Listed on the stock exchange
Shares sold to the public
No limit to shareholders
Larger management structure
What is a government enterprise?
A business owned and operated by the government
Provides community services like roads, health, and education
What is a franchise?
A person buys the rights to use an existing business’s name, products, and services.
How does size influence the choice of legal structure?
Small businesses often start as sole traders or partnerships.
As they grow, they may become private or public companies for access to more finance and limited liability.
How does ownership affect legal structure choice?
Sole trader for full control
Partnership for shared control
Private/public company for shared ownership via shares
How does finance affect legal structure choice?
Sole traders/partnerships have limited access to finance
Companies raise money by selling shares
