Understanding Business Structures and Market Dynamics

What happens when a national business's domestic market becomes saturated?

The business may decide to export and sell its products in other countries to tap into new markets.

What features are common in fully developed multinational corporations?

Finance, assets, technology, information, employees, and goods and services flow freely from one country to another.

What is the legal status of a sole trader?

A sole trader is not regarded as a separate legal entity; the owner and the business are considered the same.

What is the maximum number of partners allowed for medical practitioners and stockbrokers?

They are allowed up to 50 partners.

What is the maximum number of partners allowed for veterinarians, architects, and chemists?

They are allowed up to 100 partners.

What is the maximum number of partners allowed for solicitors and accountants?

They are allowed up to 400 partners.

What is the significance of a partnership agreement?

While not compulsory, a written partnership agreement is important to resolve disputes that may arise.

What does the term 'veil of incorporation' refer to?

It refers to the legal separation between a company and its owners, allowing the company to act as a separate legal entity.

What is the Limited Liability Act and its significance?

Passed in 1855, it protects shareholders by limiting their financial loss to the amount they paid for shares in a company.

What does the abbreviation 'Ltd' signify in a company name?

It indicates that the business offers limited liability to its shareholders.

What does incorporation allow a company to do?

It allows the company to sue, be sued, lease, sell, or own property.

How can a partnership be formed?

A partnership can be formed verbally, in writing, or by implication without a legally binding agreement.

What is the main advantage of a private company?

Shareholders have limited liability protection.

What is required for a proprietary company to be wound up?

All shareholders must agree to the company being wound up.

Who manages the process of closing a proprietary company?

A liquidator manages the process of selling assets, paying debts, and distributing funds.

What must a public company do when selling shares for the first time?

Issue a prospectus.

What is one example of a government enterprise in Australia?

Medibank Private.

What is the process by which a government enterprise changes to a public company?

Privatisation.

Why might a business choose a private company legal structure?

To seek the protection of limited liability during rapid expansion.

What is a sharemarket float?

The raising of capital in a company through the sale of shares to the public.

How can an established public company raise additional funds?

By selling more shares to existing shareholders.

What is venture capital?

Money invested in small or struggling businesses with potential for success, where investors take an equity position.

What is a potential risk of a share float?

Floats can fail to generate interest and may be undersubscribed.

What is the key distinction between quaternary and quinary industries?

Quaternary involves knowledge-based services (like IT and education), while quinary involves high-level decision making and services (like healthcare and education).

How does incorporation benefit business owners seeking finance?

It provides limited liability, making it more attractive for investors.

What are the primary products of the secondary industry?

Iron ore, coal, and limestone are turned into steel, which is then used to manufacture cars.

How does Australia's geographic location influence its businesses?

Australia's Asia-Pacific location offers opportunities for exports and sales, particularly with the growth of Asian nations.

What demographic changes are impacting Australian businesses?

The ageing Baby Boomer generation is increasing demand for age-related services and causing workforce skill shortages.

What is the significance of corporate social responsibility (CSR) for businesses?

Businesses must be aware of CSR to meet consumer expectations and address issues like environmental awareness and workplace diversity.

What legal regulations must businesses comply with in Australia?

The Competition and Consumer Act 2010, the Fair Work Act 2009, the Corporations Act 2001, and the Public Health Act 2010.

What are some responsibilities of state governments regarding businesses?

Administering worker's compensation, workplace health and safety, pollution controls, and health legislation.

What impact does globalization have on Australian businesses?

Globalization allows businesses to transmit information and engage in international trade.

What factors are studied in demography?

Population size, age, sex, income, cultural background, and family size.

What is the impact of workplace diversity on recruitment?

Businesses must address diversity issues related to gender, age, language, and ethnicity during recruitment.

What is the role of the Australian Competition and Consumer Commission (ACCC)?

Administering the Competition and Consumer Act 2010.

What is the purpose of the Fair Work Commission?

Administering the Fair Work Act 2009.

What is the role of regulatory bodies in the business environment?

Regulatory bodies monitor and review business and consumer actions to ensure fairness for consumers, communities, and other businesses.

Name three examples of regulatory bodies in Australia.

NSW Environmental Protection Authority, NSW Fair Trading, ASIC, ACCC.

What are the key components of internal operations necessary for businesses?

Adequate manufacturing and storage for goods, and trained service personnel for services.

What does society provide to a business?

Awareness and employment in return for consideration of current issues.

What is the role of the Australian Competition and Consumer Commission (ACCC)?

To administer the Competition and Consumer Act 2010, ensuring compliance among businesses in Australia.

Which act governs the process of incorporation in Australia?

The Commonwealth Corporations Act 2001.

What constitutes legal conduct according to ASIC?

Transparent reporting and adherence to governance standards.

What are examples of illegal actions according to the ACCC?

Deceptive marketing and anti-competitive practices.

What percentage of firms experience bankruptcy in their first year?

33%.

What is the overriding concern for businesses in the establishment stage?

Getting the business on a solid foundation with enough sales to generate income.

What is vertical integration in the context of mergers?

It occurs when a business expands at different but related levels in the production and marketing of a product.

What is backward vertical integration?

When a business integrates with one of its suppliers, such as a bakery acquiring a wheat farm.

What are the classifications of business by size?

Small to Medium Enterprises (SMEs) and large businesses.

What measurements can determine the size of a business?

The number of employees, number of owners, market share, and legal structure.

What characterizes a local business?

A local business has a restricted geographical spread and serves the surrounding area, typically being small to medium in size.

What defines a national business?

A national business operates within one country and expands its range of products and area served.

What is a global business?

A global business, or multinational corporation, has branches in many different countries and conducts a large percentage of its business outside its home country.

What are some examples of multinational corporations?

Coca-Cola, LG, McDonald's, CSR, News Corporation, Westfield, and Exxon.

What is a sole trader business?

A sole trader is owned and operated by one person who provides all the finance, makes all decisions, and takes all responsibility.

What is the legal requirement for a sole trader regarding business name registration?

The business name must be registered if it differs from the owner's name.

What does unlimited liability mean for a sole trader?

The owner is personally responsible for all business debts, which may include selling personal assets to cover liabilities.

What is a partnership in terms of business structure?

A partnership is a legal business structure owned and operated by between two and 20 people.

What is a partnership in business?

A partnership is a business structure where two or more individuals operate a business together, sharing profits and liabilities without a separate legal entity.

What is a silent or sleeping partner in a limited partnership?

A silent or sleeping partner contributes financially to the business but does not participate in its management.

What is the role of the Australian Securities and Investments Commission (ASIC) in company incorporation?

ASIC administers the process of incorporation and issues certificates of incorporation and Australian Company Numbers (ACN).

What does limited liability mean for shareholders?

Shareholders can only lose the amount they invested in shares and cannot be forced to sell personal assets to cover company debts.

What are the obligations of directors in a limited liability company?

Directors must ensure the company complies with the law and acts in the interests of shareholders.

What is a proprietary (private) company?

A proprietary (private) company is a common type of business structure in Australia, usually with 2 to 50 private shareholders.

What is a key characteristic of shares in a proprietary company?

Shares are offered only to selected individuals approved by the directors and are not available on the stock exchange.

What is the abbreviation for proprietary limited companies?

Pty Ltd.

What is the typical size of businesses that are proprietary companies?

They are often small to medium-sized, family-owned businesses.

What happens to a company's existence when ownership changes?

The company continues to exist due to perpetual succession.

What is the purpose of registering a company name with ASIC?

To obtain a certificate of incorporation and an Australian Company Number (ACN).

What is the difference between public and proprietary companies?

Public companies can sell shares to the general public, while proprietary companies restrict share sales to approved individuals.

What is the implication of a partnership having unlimited liability?

Partners are personally responsible for the debts of the business.

What are the characteristics of a public company?

A public company has at least one shareholder, no maximum number of shareholders, no restrictions on share transfer, must issue a prospectus for initial share sales, requires a minimum of three directors (two must live in Australia), includes 'Limited' or 'Ltd' in its name, and must publish audited financial accounts annually.

What are government enterprises also known as?

Government business enterprises (GBEs).

What levels of government operate government enterprises?

Federal, state, and local governments.

What is the rationale behind the privatisation of government enterprises?

Economic efficiency is believed to increase by transferring enterprises from the public sector to the private sector.

What is the most common legal structure for small businesses in Australia?

Unincorporated business entities, such as sole traders and partnerships.

What does it mean for a business to be incorporated?

It means the business becomes a separate legal entity from the owners, allowing it to continue operating independently of the owners' status.

What happens to an unincorporated business when the owner dies?

The business entity ceases to exist, as it has no separate legal existence from the owner.

What are the two main types of business structures?

Incorporated businesses (private and public companies) and unincorporated businesses (sole traders and partnerships).

What factors influence the choice of legal structure for a business?

Size of the business, number of owners, employees, and changing customer demand.

How does business growth affect the choice of legal structure?

As sales increase and operations grow, a business may need to select a more appropriate legal structure.

What is the typical starting legal structure for most businesses?

Sole trader or partnership.

What is the minimum requirement for directors in a public company?

A minimum of three directors, with at least two residing in Australia.

What is the role of a liquidator in the winding up of a company?

To manage the sale of assets, payment of debts, and distribution of funds to shareholders.

What is the legal status of a business that is unincorporated?

It has no separate legal existence from its owner(s).

What is the impact of increasing sales on a business's legal structure?

It may necessitate a transition to a more complex legal structure to accommodate growth.

What is the significance of the term 'Limited' in a company name?

It indicates that the company is a public company with limited liability.

What are the advantages of forming a partnership or private company?

They can bring extra finance, skills, and expertise.

What determines the best legal structure for a business?

It depends on personal preferences, business conditions, and the overall business environment.

What type of business structure allows for complete control by the owner?

Sole trader.

What is the control level in partnerships compared to companies?

Partial control in partnerships and very little control in companies due to diluted ownership.

How does a private company maintain control over ownership?

It restricts the maximum number of shareholders to 50.

What happens to ownership when a company floats and sells shares to the public?

Ownership is divided among thousands of small and institutional shareholders.

What percentage of shares must original owners retain to maintain control of the business?

More than 50 percent.

What financial needs arise during business expansion?

Funds for purchasing equipment, R&D, hiring staff, and opening new outlets.

Why might sole traders and partnerships struggle to obtain finance?

They have unlimited liability and few business assets, making them high-risk to banks.

What is the primary industry?

Businesses involved in the collection of natural resources, such as farming, mining, fishing, grazing, and forestry.

What does the secondary industry do?

It processes raw materials from the primary sector into finished or semi-finished products.

What is the role of research and development (R&D) in business expansion?

R&D is crucial for innovation and improving products or services to meet market demands.

What is the relationship between the number of shares owned and ownership control in a company?

More shares owned equate to more ownership and control.