unit 1 topic 1 Flashcards
name the 4 legal ownership structures
sole trader
partnership
private company
public company
what is a sole trader
a business owned and operated by one person.
characteristics of a sole trader
simple and cheap to establish
unlimited liability
can change structure with growth and expansion
advantages of being a sole trader
simplest form of ownership
tax is on owners income not businesses
minimal legal and government regulations
disadvantages of a sole trader
owner is responsible for debts
business finances are limited to the owners finances
owner needs to be multi-skilled
Unlimited liability
what is a partnership
a business structure that involves a number of people who operate a business together.
how must decisions be made in a partnership?
mutual agency
under the act all partners are responsible for the decisions of other partners.
all or a particular number of partners have to sign off on it
characteristics of a partnership structure
simple to establish
unlimited liability – does not require own TFN
shared responsibility
must be registered for GST
advantages of a partnership
low start-up costs
shared responsibility and management
minimal legal and government regulations
tax is on owners’ income
disadvantages of a partnership
change in ownership can be difficult
owners are responsible for the debts of the business – unlimited liability
partnership may be dissolved if a partner dies
what is a company
is a separate legal entity from its owners
characteristics of a company
sperate legal entity requires a TFN must be registered for GST must comply with corporations act board of directors limited liability
advantages of a company
greater source of management expertise limited liability ownership is easily transferable greater capacity for capitol greater spread of risk
disadvantage of a company
complex and expensive to establish
profits are divided
must report financial situation publicly
name all 5 business categories
home-based digital local national international
