Sole Trader

A sole trader is a business that is owned and operated by one person often with the primary objective of making a profit

Key characteristics:

Relies on skills, talents and experience of the owner to be successful

Advantages

The owner has complete control over the running of the business and can make decisions based on their best interests.

Disadvantages

Subject to unlimited liability, meaning the owner is personally responsible for all business debts.

Partnership

A partnership is a type of business that is owned by between two and 20 partners.

Key characteristics:

All partners share in the risks and rewards of operating the business.

Advantage

A greater pool of knowledge, experience, funds and talent is available to help run the business

Disadvantage

Can be hard gaining total agreement from all partners when trying implement change or make decisions in the business

Private limited company

A private limited company is an incorporated business that is owned by between 1 and a maximum of 50 shareholders.

Key characteristics:

Shares in a private company are only offered to those people the business wishes to have as part owners and are not traded on securities exchange. A private company is identified by the letters ‘Pty Ltd’ after their trading name.

Advantage

Limited liability, meaning the owners of the business are treated as a separate legal entity – important if the business becomes insolvent or declares bankruptcy.

Disadvantages

More costly to establish when compared to a sole trader or partnership – accountancy and legal fees etc. Directors/owners can still be held personally liable if found to have behaved in a fraudulent manner.

Public listed company

An incorporated business that will have a minimum of 1 and no maximum amount of shareholders.

Key characteristics:

A public company has its shares freely traded on the Australian Securities Exchange (ASX). It is identified by the letters ‘Ltd’ after its trading name.

Advantages

Limited liability, Easier to attract public finance to assist with business growth often through further share issues

Disadvantages

Expensive to establish Greater public scrutiny, with financial reports having to be published annually

Social Enterprises

A social enterprise is a business that produces goods or services to sell to consumers, but exists to benefit society rather than the owners.

Key Feature:

Run just like a normal business, however operates with the primary objective to fulfil a social need such as: Providing employment opportunities for the disadvantaged Contributing to other causes such as addressing societal issues e.g. eradicating homelessness, environmental causes etc.

Advantage

Being a social enterprise can provide a point of difference from other competing businesses helping to attract customers

Disadvantage

It can be difficult trying to focus on both social and financial objectives

Government Business Enterprise (GBE)

A Government Business Enterprise is a commercial entity that is owned and operated by the government.

Key characteristic:

The main purpose of a GBE is to carry out the policy of the government through the delivery of paid for services to the community.

Advantage

Provides healthy competition to businesses operating in the private sector – potentially leading to lower prices for consumers.

Disadvantage

Political interference can cause inefficiencies in the way GBEs are run.