EXAM REVISION BUSINESS 3/4 Folder

Business

A type of organization that is involved in the provision of goods and/or services. In order to make a profit and meet other business objectives.

Sole trader

is an unincorporated business structure that is owned and operated by one individual

unincorporated

is a legal status of a business whereby the business owner and the business are viewed as the same legal entity

Unlimited liability

is the personal legal responsibility a business owner has for an unincorporated business's debts.

advantages of sole trader

- The owner has full control and decision-making power.

- There is a low risk of disputes, as there is only one owner making decisions.

- Other owners do not need to be consulted when making decisions, therefore decision-making can be quick.

disadvantages of sole trader

- Unlimited liability puts the owner's personal assets at risk, as they can be seized to pay off business debts.

- The knowledge and skills are limited to the owner, meaning the owner may not have appropriate expertise in various areas.

- The life of the business ends when the owner dies. - poor perpetuity

A partnership

is an unincorporated business structure that is owned by two to 20 owners

Advantages of Partnership

- Greater range of expertise and ideas amongst numerous partners.

- Owners can share the workload and take time off as there are multiple people that can manage the business.

- Greater access to finances as there are more people involved and the financial and legal risks are shared between partners.

disadvantages of partnership

- Unlimited liability means that the partners' personal assets are at risk, as they can be seized to pay off business debts.

- Conflicts could arise due to shared decision-making and personality clashes amongst partners.

- If one partner leaves, it could be time-consuming to restructure the partnership.

Private Limited Company (Pty Ltd)

is an incorporated business structure that has at least one director and a maximum of 50 shareholders

incorporated

is a legal status of a company whereby the company is established as a separate legal entity to the shareholder/s

shareholders

are the individuals or organisations who have purchased shares of a company and therefore are part-owners of the company

dividends

are regular sums of money paid out to shareholders from a company's profit.

limited liability

is when shareholders are only liable to the extent of their original investment, meaning they are not personally responsible for the business debts

advantages of a private limited company

- There is limited liability for shareholders.

- There is a greater variety of expertise and ideas as more people are involved.

- The business's existence is not threatened by the removal of one director.

disadvantages of private limited company

- It is expensive to set up and operate, as there are higher set-up and ongoing administration costs.

- Complex reporting requirements, such as annual reports, need to be published for shareholders.

- It is difficult to change structure once a company has been established.

public listed company (Ltd)

is an incorporated business that has an unlimited number of shareholders and lists and sells its shares on the ASX.

Australian Securities Exchange (ASX)

is the electronic market where Australian public company shares are bought and sold.

Advantages of a public listed company

- Shareholders have limited liability.

- There is greater access to expertise and ideas as more people are involved.

- Greater access to capital, as any member of the public can purchase shares

disadvantages of public listed company

- Conflicts could arise through shared decision-making between directors

- It is expensive to set up and operate.

- There are complex reporting requirements, such as annual financial reports, that need to be published to the public.

a social enterprise

is a type of business that aims to fulfil a community or environmental need by selling goods or services.

Advantages of a social enterprise

- The community benefits from the business's activities.

- The business can develop a positive reputation, as they are helping and contributing to society.

- Employees have purposeful work, so they are more likely to be satisfied with their job.

Disadvantages of Social Enterprise

- Difficult to balance the achievement of financial objectives with social objectives.

- May be difficult to obtain a bank loan as the business does not solely focus on financial objectives.

A government business enterprise (GBE)

is a business that is owned and operated by the government.

Advantages of Government Business Enterprise

- Delivers goods and services that help the community and the community's needs.

- Provides healthy competition to the private sector.

- GBEs can operate with some independence from the government

Disadvantages of Government Business Enterprise

- Governments and politicians can interfere and change the strategic direction of the business.

- GBEs have to follow significant 'red tape', which refers to excessive rules and formalities, compromising how quickly GBEs can do things.

- Productivity may be lower than private-sector businesses as there tends to be a lack of accountability in the public sector.