UNIT 3 AOS 1- Business foundations

Sole trader

a business owned and operated by one person

Sole trader- advantages

-easy to set up

-owner gets all profit

-control of decision making

-no partner disputes

sole trader- disadvantages

-unlimited liability

-limited access of capital

- Knowledge and skills may be limited

Partnerships

a business owned by two or more people (max of 20)

Partnerships- advantages

-more financial capital

-combined managerial skills

-share workload and risk

-low start-up costs

-less costly to operate

partnerships- disadvantages

-potential conflict between partners

-shared profits

-legal agreement required

-unlimited legal liability

Private Limited Companies

companies that are sperate legal entities to the shareholders, where shares are owned by family members or close friends

Private limited companies- advantages

-limited liability for shareholders

-raise more capital through selling shares

-better borrowing power

-business continues even if shareholders change

Private limited companies- disadvantages

-share the profits

-more complex start up

-higher start-up and running costs

Public listed companies

shares are listed on the ASX and are available for any member of the public to buy and sell

public listed companies- advantages

-large amount of money raised from selling shares

-dominate market share

public listed companies- disadvantages

-outside parties may take control of company

-financial information is public

-loss of contact with customers

social enterprise

a business with the objective of fulfilling a social need

social enterprise- advantages

-opportunity to make a difference in the community

-target specific sectors of the community

-great for marketing

social enterprise- disadvantages

-legal risk- must meet social mission

-limited tax benefits for investors

-potential cash flow problems

government business enterprises

a type of business that is government owned and operated

government business enterprise- advantages

-limited price fluctuations of products

provide essential services

-control of the industry

Government business enterprises- disadvantages

-losses may lead to higher taxes

-lack of competition leads of inefficiencies

objectives

a desired outcome or specific result that a business intends to achieve.

profit

what is left after business expenses have been deducted from money earned from sales (revenue)

market share

a business’s proportion of total sales in a market or an industry

efficiency

how well a business uses resources to achieve objectives

effectiveness

the degree to which a business has achieved its stated objectives

market

set of actual or potential buyers of a product or service