AOS 1 UNIT 3 BUS TYPES OF BUSINESSES AND BUSINESS OBJECTIVES

BUSINESS UNIT 3 AOS 1

TYPES OF BUSINESSES

Various types of business structures exist, including sole traders, partnerships, private limited companies, public listed companies, social enterprises, and government business enterprises. A sole trader business is owned and run by a single person, who has the option to employ others. The owner is responsible for all financial decisions and takes full responsibility for the business's operations. Establishing a sole trader business is straightforward; the only legal requirement is to register the business name with the Australian Securities and Investments Commission (ASIC), provided it differs from the owner's name. A sole trader is not recognized as a separate legal entity; therefore, the owner is personally liable for all business debts, which implies unlimited liability. This could compel the owner to liquidate personal assets to satisfy business obligations.

A partnership comprises two or more individuals, typically limited to a maximum of 20 partners, though certain professions can have up to 400 partners. Similar to a sole trader, a partnership does not constitute a separate legal entity, resulting in partners facing unlimited liability for the business's debts. Businesses may evolve from sole traders or partnerships to a company structure through incorporation, regulated by the Commonwealth Corporations Act 2001 and overseen by ASIC. To become incorporated, a business must register a company name with ASIC, which then issues a certificate of incorporation and an Australian Company Number (ACN).

The private limited company is the predominant company structure in Australia, requiring a minimum of one shareholder and allowing a maximum of 50 non-employee shareholders. These companies must also have at least one director. Conversely, a public listed company has its shares listed on the Australian Securities Exchange, allowing the public to buy and sell them. Public companies generally have more shareholders, with no limit on the number, and lack restrictions on share transfers or raising public funds. They must appoint a minimum of three directors (with at least two living in Australia) and include the term "Limited" or "Ltd" in their name. Public companies are required to disclose their audited financial accounts annually.

A social enterprise aims to fulfill social needs while producing goods and services for the market, focusing on community or environmental goals. In contrast, a government business enterprise (GBE) is publicly owned and operated and engages in commercial activities aimed at profit generation, functioning similarly to private companies.

BUSINESS OBJECTIVES

Objectives are essential for giving direction to a business, increasing the likelihood of success. Businesses typically have several primary objectives, including making a profit, increasing market share, improving efficiency and effectiveness, fulfilling market and social needs, and meeting shareholder expectations. Making a profit is central to most businesses, defined as the remaining amount after deducting expenses from revenue. For instance, if expenses total $100,000 and revenue is $300,000, a profit of $200,000 is realized.

Increasing market share refers to a business's proportion of total sales within an industry, illustrated through comparisons with competitors. For small businesses, this increase focuses on local competitors, while larger businesses often aim for a national market presence. Improving efficiency involves using resources effectively to maximize output, thereby reducing operational costs, whereas improving effectiveness measures success in achieving business objectives. Some businesses prioritize fulfilling market needs by providing unique products or services unavailable elsewhere, while others focus on social needs, aiming to generate a positive impact on society. Lastly, businesses aim to meet shareholder expectations by ensuring profitability, as shareholders anticipate returns on their investments in the form of dividends or capital gains.

By setting clear business objectives and associated strategies, companies direct stakeholder efforts towards common goals, with performance evaluated using key performance indicators.