Business ownerships

Definition of sole trader

A business owned and maintained by a singular person

The 6 facts about sole traders

• singular owner

• Owner has full control

• Easy to set up

• Can register for a ABN

• Unlimited liability

• Business name registrations are required if operating under anything other than the owner’s name

Why become a sole trader

• be your own boss

• A challenge

• To achieve a goal

• To work on something you are passionate about

How to become a sole trader

1. Apply for a ABN Unlimited liability

2. Register a business name

3. Get a tax file number

4. Register for GST is your expected turnover is $75000

Defintion of partnership

A business that is owned by 2 -20 partners

8 facts about a partnership

• multiple owners

• Collective decision making

• Requires an ABN

• Unlimited liability

• Individual taxation

• Relatively easy set up

• governed by the partnership act of 1985

• Profit sharing

Advantages of a sole trader

• easy set up

• Retain control

• All profits are yours

Disadvantage of sole trader

• unlimited liability

• Limited finance

• All responsibilities are yours

Why start a partnership

• shared workload

• Shared decision making

• Ability to raise more capital investment

• Variety in expertise

• More ideas and innovation

How to become a partnership

1. Register for ABN and business name

2. Create a partnership agreement or follow the partnership act

What is a partnership agreement

A clearly outlined document that states how each partner is responsible or how the profits are shared

Definition of small proprietary company

A business that operates privately with no more than 50 non-employee shareholders. It operates privately = shares are not bought and sold on the stock exchange.

8 facts about a small proprietary company

• consists of 1-50 non-employee shareholders

• Employee limit is 100

• Is governed by a board of directors

• Shares are not traded publicly

• Limited liability

• Is a seperate legal entity

• Simplifies reporting requirements; must register with ASIC

• Expensive set up

What is ASIC

Australian Securities and Investments Commission, a government body that regulates corporate, market, financial services, and consumer credit sectors in Australia. It ensures fair and transparent financial markets and protects consumers, investors, and creditors from financial fraud.

Roles of the board of directors

• decides overall strategic direction of the business

• Sets policy and procedures

• Has financial authority

• Consists of chairman (overall responsibility)

• Consist of ceo

• Consists of executive officers and directors

Why choose a PTY LTD

• limited liability

• Ability to raise more capital

• Easier to obtain finances

• Is taxed less than other business ownerships

How to become a PTY LTD

1. Apply for a business name

2. Apply for a ACN

3. Compete documents for company registration

4. Submit documents to ASIC

5. Obtain an issue of incorporation certificate and ACN

Advantages of PTY LTD

• Limited liability

• Ability to raise more capital investments than most partnerships

• Easier to obtain finance

• Tax efficiency

• Avoiding conflict

• Succession

Disadvantages of PTY LTD

• complex and expensive set up

• Government regulations

• Director and shareholders requirements

• Limited control over daily decisions but is held accountable if policy and procedures are not being followed

Defintion of public company LTD

Business where shares are traded on the stock exchange with 5 to unlimited shareholders