types of businesses

Question 1

Sole Trader

Answer 1

A business owned and operated by a single person.

• Simplest and most cost-effective legal business structure
• Has unlimited liability
• Responsible for all payments and/or loans

Question 2

Partnership

Answer 2

A business owned by 2 to 20 owners.

• Responsibilities and profits can be shared between owners
• Partners responsible for funding business
• Unlimited liability
• Pay personal income on tax

Question 3

Private limited company

Answer 3

An incorporated business with at least one director and up to 50 selected shareholders.

• Separate legal entity
• Business owners own shares in the business
• Can be made up of 1 person (director and sole shareholder) or several directors and 50 shareholders
• Shareholder has limited liability (‘proprietary limited (Pty. Ltd.))
• Can raise or increase funding by selling shares (prior to shareholders receiving a turn on shares business profits are subject to company tax (Must pay further income tax on any profits they receive))

Question 4

Public listed company

Answer 4

An incorporated business that can sell shares in an open market to an unlimited number of shareholders.

• Can raise funds for the business by selling shares to the public (ASX)
• Public can buy shares for the listed price and a portion of the businesses’ profits through dividends
• Shareholders can earn a profit by selling shares later at a higher price
• All companies listed on the ASX will have Ltd. (Limited) after their business name

Question 5

Social enterprise

Answer 5

A business that aims to make a profit and improve the community.

• Not considered a legal business structure
• Sole traders, partnerships, private companies that work towards a community or environmental cause
• Aim to generate a profit with the majority of income coming from sales and not donations

Question 6

Government business enterprise

Answer 6

A profit driven business that is owned by but managed separately from the government.

• Fulfil a specific purpose outlined by the government while remain profitable
• Large scale public service such as housing, transport or communication which aims at essential public needs
• GBE accountable to government and public