Yr12 Jacaranda Textbook

Question 1

Types of Businesses

Describe sole traders

Hint: include definition + 3 points

Answer 1

• one person who owns and runs the business
• easy to eastablish – only legal requirement is that the name of the business is registered with ASIC (if different to owner’s name)
• not regarded as a separate legal entity – owner and business regarded as the same
• unlimited liability – owner fully responsible for business debts; they must sell personal assets to pay debts

Question 2

Types of Businesses

Describe a social enterprise

Hint: include definition + 1 point + 5 examples of social needs

Answer 2

• produces goods and services in the market but with the primary objective of fulfilling a social need
• can be cooperative (a business that is owned and operated by the group of members) or a privately-owned business
• Examples of typical social needs are:
  1. opportunity for local unemployed people
  1. developing skills, provide vocational training or lifelong learning opportunities for disadvantaged people in the community
  1. creating accessibility to a better quality of life for disadvantaged members
  1. providing essential services to disadvantaged communities
  1. focusing on waste minimisation and recycling

Question 3

Types of Businesses

Describe a partnership

Hint: include definition + 6 points

Answer 3

• owned by two or more people and has a maximum of 20 partners
• not a seperate legal entity
• unlimited liability
• agreement made verbally, in writing or by implication
• often has a standard set of conditions
• has its own tax file number + tax return
• limited partnerships– allow 1+ partners to contribute financially & take no part in running it (called ‘silent’ or ‘sleeping’ partner)

Question 4

Types of Businesses

Describe a government business enterprise (GBE)

Hint: include definition + 6 points

Answer 4

• government owned and operated, with the goal of making a profit
• carry out government policies
• operate at both the federal and state level
• aim to increase the value of their assets and returns to their shareholder (government)
• board of management or board of directors controls a GBE
• large businesses + employ many people
• Statutory corporation = an Act of Parliament (a law) had been passed on to establish it

Question 5

Types of Businesses

Describe a private limited company

Hint: include definition + 7 points

Answer 5

• incorporated business with minimum of 1 shareholder (+ max of 50 non-employee shareholders)
• ≥1 director – can be a shareholder
• small → medium sized (often family-owned)
• not listed on, and shares not sold through stock exchange
• must have ‘Pty Ltd’ = Propriety Limited
• shareholders can sell shares only to people approved by other directors (offered only to people whom business wishes to have as part owners)
• to close business → ALL shareholders must agree
• Liquidator (external party) → manage process of selling company’s assets + paying debts + distributing funds from asset sales among shareholders

Question 6

Types of Businesses

Describe a public listed company

Hint: include definition + 6 points

Answer 6

• incorporated business with a minimum of 1 shareholder (no max.) and whose shares are openly traded on ASX
• large in size + large range of products
• no restrictions on transfer of shares or raising of money from the public via share offers
• requirement to provide certain info. when selling shares for the first time
• minimum of 3 directors (2 must live in Australia)
• must have ‘Limited’ (or ‘Ltd’) in its name
• requirement to publish its audited financial accounts each year – included in an annual report

Question 7

Types of Businesses

Describe Incorporation

Hint: include definition + 7 points

Answer 7

• Process that businesses go through to become a registered company and a separate legal entity
• governed by Commonwealth Corporations Act 2001
• administered by Australian Securities and Investments Commission (ASIC) → issues: certificate of corporation + Australian Company Number (ACN)
• separate legal entity to owners (now called ‘shareholders’)
• gives limited liability → can only lose amount paid in shares
• liquidation (debt) → NOT force shareholders to sell personal assets
• directors → obligation to ensure the company obeys the law and acts in the interest of shareholders
• “Ltd” = has limited liability → can be propriety (private) or public

Question 8

Types of Businesses

State the advantages of a sole trader

Hint: 8 points

Answer 8

• low cost of entry
• simplest form
• complete control
• less costly to operate
• no partner disputes
• owner’s right to keep all profit
• less government regulation
• profit is taxed as personal income

Question 9

Types of Businesses

State the disadvantages of a sole trader

Hint: 7 points

Answer 9

• personal (unlimited) liability for business debts
• end of business when owner dies (no perpetuity)
• difficult to operate if sick
• need to carry all losses
• burden of management
• need to perform wide variety of tasks
• difficulty in raising finance for expansion

Question 10

Types of Businesses

State the advantages of a partnership

Hint: 7 points

Answer 10

• low start-up costs
• less costly to operate than a company
• shared responsibility and workload
• pooled funds and talent
• minimal government regulation
• no taxes on business profits, not only on personal income
• on death of one partner, business can keep going (perpetuity)