Types of Business Ownership

Sole Trader

The simplest form of business ownership structure where one person owns the business and makes all decisions.

Key Features of Sole Trader

Single owner, full control, easy to set up, must register for an ABN, unlimited liability, and business name registration required.

Unlimited Liability

The owner is personally liable for all debts and obligations of the business.

Partnership

A business structure involving two or more people (up to 20) who share ownership and make decisions to generate profit.

Key Features of Partnership

Multiple owners, shared control, must register for an ABN, unlimited liability, individual taxation, and relatively easy setup.

Partnership Act 1895

The act that sets rules and regulations governing partnerships in absence of a written agreement.

Small Proprietary Company (Pty Ltd)

A common company structure in Australia, offering limited liability to shareholders and separate legal status.

Limited Liability

Shareholders are only liable for the company’s debts up to the amount they invested.

Not For Profit Organizations (NFP)

Organizations that provide services to the community without aiming to make a profit for members or shareholders.

Charities

A type of NFP focused on supporting people in need, promoting education or religion, and benefiting the community.

Franchise

A business model involving a contract between a franchisor and a franchisee to operate under the franchisor's brand.

Franchise Agreement

A legal contract outlining the terms and conditions between the franchisor and franchisee.

Advantages of Sole Trader

Simple setup, complete control, fewer reporting requirements, and easy legal structure changes.

Disadvantages of Sole Trader

Unlimited liability, all work falls on the owner, and difficulty taking holidays.

Advantages of Partnership

Simple setup, minimal reporting requirements, shared management, and access to greater capital.

Disadvantages of Partnership

Profit sharing, potential for disputes, unlimited liability, and must dissolve if a partner dies.

Advantages of Pty Ltd

Limited liability, easier to attract investors, tax efficiency, avoiding conflicts, and continuity of existence.

Disadvantages of Pty Ltd

Higher costs, regulatory requirements, director and shareholder requirements, and complex dissolution.

Common Steps for Setting Up an NFP Organization

Define purpose, determine legal structure, register with the government, develop governing documents, and comply with reporting requirements.

Advantages of NFP Organizations

Focus on social impact, tax benefits, community engagement, mission-driven work, and volunteer support.

Disadvantages of NFP Organizations

Financial challenges, regulatory burden, reliance on donor priorities, and public scrutiny.

Franchisor's Role

Provides the brand, business system, training, and controls business operations.

Franchisee's Role

Operates the franchise under franchisor's rules, pays fees, and assumes financial risk.

Advantages of Franchising

Lower start-up risk, immediate brand recognition, support from franchisor, and efficient practices.

Disadvantages of Franchising

Limited decision-making power, reduced flexibility, risk to brand reputation, costs, and dependency on the franchisor.