Ownership structures

• Sole structure: A business that is owned and operated by one person 

  Features: Unlimited liability, same legal entity as owners 

  Advantages: Low start-up costs, the owner has complete control of the business, the owner keeps all the profits 

  Disadvantages: Unlimited liability (personal assets at risk), reliant on owners' knowledge and skills, no perpetuity 
• Partnership: A business that is owned by between 2-20 people

  Features: Unlimited liability, same legal entity as owners 

  Advantages: Low start-up costs, workload shared among partners, access to more equity, skills and knowledge

  Disadvantages: Unlimited liability (personal assets at risk), profits are shared among partners, potential for disagreements
• Public listed company (Ltd): An incorporated business that is owned by a minimum of one person and whose shares are freely traded 

  Features: Limited liability, shares in the company freely traded (ASX), shareholders receive a proportion of the profits through dividends 

  Advantages: Limited liability, able to raise large amounts of capital (ASX), perpetuity 

  Disadvantages: More expensive, complex and time consuming to establish, more reporting requirement & accountability, possible loss of control of who can own company 
• Private limited company (Pty Ltd): An incorporated business that is owned by between 1 to 50 private shareholders

  Features: Separate legal entity, limited liability, shareholders own part of the business and share in the profits (dividends), share not freely traded to the public 

  Advantages: Limited liability, perpetuity – can exist without the owners, attract capital by offering more shares to new partners 

  Disadvantages: More complex and expensive to establish, shares not traded freely, more reporting requirement 
• Sole trader

  A business owned and operated by one person
• Partnership

  A business owned by between two and 20 people
• Shareholders (or members)

  The owners of a company
• Company

  A business which is owned by shareholders and it has become a company through the process of incorporation
• Incorporation

  The process that businesses go through to become a registered company and a separate legal entity from the owner/shareholder
• Limited liability

  When the shareholders in a company will not be held personally responsible for the debts of that business
• Unlimited liability

  When the business owner is personally responsible for all the debts of their business