UNIT 3 AOS 1- BUSINESS FOUNDATIONS, TYPES OF BUSINESS

Question 1

what are the key characteristics/ distinguishing features to determine ownership?

Answer 1

• number of owners, ownership structure, legal structure, decision making features, market share

Question 2

what is a sole trader?

Answer 2

is a business structure that is owned and operated by one individual.

Question 3

what are key characteristics of a sole trader?

Answer 3

• Unlimited liability
• Contributes all capital
• Private sector

Question 4

what are advantages of a sole trader?

Answer 4

• Low cost to start up and operate
• Simple to register using the owners name/ registering with ASIC
• Owner gets to keep all the profits

Question 5

what are disadvantages of a sole trader?

Answer 5

• Unlimited liability
• Difficulty raising finance for expansion
• burden on owner to make all decisions

Question 6

what is a partnership?

Answer 6

is a business structure that
is owned by two to 20 owners.

Question 7

what are key characteristics of partnerships?

Answer 7

• 2-20 owners with some exceptions
• Shared decision making
• Unlimited liability
• Limited or general partnership

Question 8

what are advantages of a partnership?

Answer 8

• Access to more capital
• Less pressure on owners as there is shared workload
• Low start up and operating cost
• bring in new ideas and expertise

Question 9

what are disadvantages of a partnership?

Answer 9

• Unlimited liability
• Disputes can arise with partners disagreeing over decisions
• Profits are shared between partners

Question 10

what is a private limited company (PTY. LTD.)?

Answer 10

Is an incorporated business structure that has at least one director and a maximum of 50 shareholders.

Question 11

what are key characteristics of a private limited company?

Answer 11

• <50 non-employee shareholders invited/ approved to purchase stock
• Incorporation (separate legal entity)
• Must be registered with ASIC and have an ACN
• Private sector

Question 12

what are advantages of a private limited company?

Answer 12

• Finance easier to obtain
• Limited liability
• Experienced management through board of directors

Question 13

What are disadvantages of a private limited company?

Answer 13

• Costly to establish
• company taxed on any profits and dividends
• Income to the shareholder is personal income tax
• Personal liability to debts if known debts couldn’t be paid
• More difficult to close the business

Question 14

what is a public listed company?

Answer 14

is an incorporated business that has an unlimited number of shareholders and lists and sells its shares on the ASX

Question 15

what are key characteristics of a public listed company?

Answer 15

• Must disclose financial annual report
• Highly complex structure and strict gov regulation
• Must be registered with ASIC and have an ACN

Question 16

what are advantages of a public listed company?

Answer 16

• Greater access to finance
• limited liability
• Has perpetuity and continues to trade regardless of shareholders

Question 17

what are disadvantages of a public listed company?