Environments - Business Ownership

Sole Trader

A single person operating a business in their own name.

Soler Trader Advantages

• owner has full control

• owner keeps all profits

• easy to set up

Sole Trader Disadvantages

• unlimited liability

• no to to share the workload

• all losses fall on the owner

Partnership

Two or more people going into business together with a view to make a profit.

Partnership Advantages

• easy to establish

• partners can bring in money and skills

• work can be shared

Partnership Disadvantages

• unlimited liability

• can be disagreements between partners over decisions

• rules must be set in place for partners leaving otherwise partnership will end

Small Proprietary Company

A separate legal entity which has the words proprietary limited in its name and no more than 50 shareholders.

SPC Advantages

• limited liability

• a person can sell their share if they wish to leave

• produce own tax return and pays company rate of 27.5%

SPC Disadvantages

• expensive to set up

• less say in running the business

• profits are shared amongst owners

• must operate within the corporations act

Not For Profit

Organisation is not operating for the profit or gain of its individual members and profits go back into operation to carry out the business’ purpose. Can be incorporated (separate legal entity) or unincorporated (not a legal entity).

NFP Advantages

• inexpensive to incorporate

• few formalities and low compliance requirements

• may be eligible to tax concessions

NFP Disadvantages

• limited to operating in the state of incorporation

• not closely monitored or regulated so no clear guidelines for operating and reducing disputes

Franchise

A business arrangement where the franchisor licenses the business model to franchisees in return for ongoing fees or royalties.

Franchise Advantages

• well established brand and product or service

• franchisor offers management training and assistance

• established operating procedures and management systems

• obtaining finance may be easier due to established market presence

Franchise Disadvantages

• franchisees have to operate the business according to the franchisors procedures

• less autonomy in business decisions

• restricted territory for operation and promotion of the business

• there may be restrictions on selling your business