types of businesses

• sole trader


  “a non incorporated business owned by one person who has unlimited liability for the debts of the business
• advantages

  •Low cost of entry and operation (not registering a company with ASIC or ATO) •Simplest form of business to understand so non-trained people can get into business •The owner has complete control over all decisions (no disputes with other owners or employees) •Owner keeps all profits (no dividends to other owners need to be paid)
• disadvantages

  •Personal unlimited liability for business debts (if the business cannot pay, the owner must pay). •business ends when owner stops (no financial records) •Burden of management is on one person (stressful; no holidays) loan hard to obtain (no financial records)
• key characteristics of sole trader

  One person has complete control and retains all the profits 2. The business is taxed at the owner’s personal tax rate 3. No compliance required with the ATO or ASIC 4. Owner has unlimited liability for all debts incurred (personal assets are at risk) 5. Cannot be sold very easily when owner wants to retire (lost financial opportunity)
• partnership


  “a non incorporated business owned by between two and 20 people (partners) who have unlimited liability for the debts of the business”
• advantages for partnership

  •Lower cost of entry and operation than a company •Minimal compliance & regulation (ASIC; ASX; ATO) compared to a company partner can make money by selling their share of the partnership (usually sold to another partner or existing employee looking to move up) •Burden of management can be shared amongst the partners
• disadvantages for partnership

  •Partners have personal unlimited liability for business debts (if the business cannot pay, the partners must pay) including those caused by fellow partners. •Possibility of disputes between partners •Challenging to find partners who can happily work together
• Private company (Pty Ltd)


  “an incorporated business (subject to the requirements of the Corporations Act, 2001) that has between 1 & 50 shareholders and is run by directors, both of whom have limited liability for the debts of the business”
• advantages of pty

  •Easy to transfer ownership by simply buying and selling the shares to different people •Experienced management (Board of directors) whose actions are closely monitored by ASIC •Company tax rate is lower than the personal tax rate Finance is easier to obtain (because the company must maintain financial records
• disadvantages of pty

  •Cost of formation (higher than a sole trader or partnership) •Greater compliance obligations and therefore costs (ASIC; ATO). It is costly to engage an external accountant to prepare financial statements each year; ASIC fees each year. •ASIC requires the disclosure of certain information (confidential data) •Directors must act in accordance with the Corporations Act (2001) and can be sued if they are not compliant
• Public company (Ltd


  “an incorporated business that can have an unlimited number of shareholders and is run by directors, both of whom have only limited liability for the debts of the business. It trades its shares on the Australian Stock Exchange (ASX)”
• advantages of ltd

  •Easy to transfer ownership by simply buying and selling the shares via the ASX. •Experienced management (Board of directors) whose behaviour is closely monitored by ASIC •Company tax rate is lower than the personal tax rate •Unlimited number of shareholders •Finance (loan from bank) is easier to obtain (because the company must maintain financial records) but it can also raise investment funding by issuing shares and selling them on the ASX
• disadvantages of Ltd

  •Cost of formation (higher than a sole trader, partnership or private company) • Greater compliance obligations and therefore costs (ASIC; ASX; ATO) than a private company. Must produce audited accounts (checked by a chartered accountant) each year •ASIC requires the disclosure of certain information (confidential data) about its business plans • Directors must act in accordance with the Corporations Act (2001) and can be sued if they are not compliant
• factors affecting choice of a bus

  size of a business people who will be involved- if it wants to employ bigger bus shoudl be chosen taxation and source of finance degree of risk- company gives owner better protection
• government business enterprise


  “an incorporated business that is government (Federal or state) owned and operated to provide public services that are not effectively provided by the private sector ”
• advantages of governement enterprise

  meet social need
• dis of gbe

  no tax paid lower revenue to government
• social enterprise


  “is an incorporated private company that exists to improve the wellbeing of others (marginalised people; the environment) through its business activities”
• advantages of social

  •Meet a social need not being adequately addressed by government •Grow employment by offering jobs to marginalized people not able to work elsewhere •Lower the cost of welfare payments (they now have jobs) •Increase taxation revenues (all employees pay personal income tax)
• disadvantage


  •The ongoing viability of the business (no profit objective) •If the business is a NFP then no tax is paid (lowers revenue to the government)