small business intro

Introduction to Small Business

  • Definition of Small Business:

    • According to the Australian Bureau of Statistics, a small business employs less than 20 people.

    • Small businesses play a crucial role in local economies by providing products and services in the community.

Types of Businesses

  • Manufacturing Business:

    • Converts raw materials into finished products.

    • Examples: Toys from wood, clothing from cloth.

  • Trading Business:

    • Buys and sells inventory with the intention of making a profit.

    • Types of Trading Businesses:

    • Retailers: Sell products directly to the public (e.g. clothing stores).

    • Wholesalers: Purchase from manufacturers and sell to retailers (e.g. bulk grocery suppliers).

  • Service Business:

    • Provides a service in exchange for a fee.

    • Examples: Solicitors, accountants, hairdressers.

Social and Ethical Factors Affecting a Business

  • Profit Motive: While profit is essential, many businesses also contribute to social causes.

  • Resource Conservation:

    • Businesses can reduce costs through eco-friendly practices:

    1. Turn off lights when not in use.

    2. Minimize paper use.

    3. Recycle toner cartridges.

    4. Use public transport to save energy.

    • Such initiatives save money and bolster business reputation.

  • Support for Community Causes:

    • Contributing to charities or sponsoring local events can enhance image and customer loyalty.

    • Example: Starbucks employees engage in charity work for community benefit.

  • Taxation Responsibility:

    • Accurate calculation and payment of taxes are a business's obligation.

Small Business Start-up Legislation

  • Business Registration:

    • Must register business name with the Australian Securities and Investments Commission (ASIC).

    • A name that is solely the owner's does not need registration.

    • Names with additional words typically require registration.

    • Registration is valid for three years.

  • GST Registration:

    • Businesses may need to register for Goods and Services Tax (GST).

Bankruptcy and Debt Agreements

  • Insolvency:

    • Definition: Inability to pay debts as they become due.

    • Governed by the Bankruptcy Act (Cth) 1966.

    • Bankruptcy typically lasts three years and requires asset liquidation to repay creditors.

  • Types of Creditors:

    • Secured: Can seize debtor's assets.

    • Unsecured: Cannot seize assets.

Options for Managing Debt:

  1. Declaration of Intention to Present a Debtor's Petition:

    • Provides temporary relief from creditor actions for 21 days to negotiate repayment.

  2. Debt Agreement:

    • Contract with creditors allowing reduced payments.

    • Requires acceptance by the majority of creditors.

  3. Personal Insolvency Agreement:

    • A binding agreement to repay debts, requiring 75% creditor approval.

  4. Voluntary Bankruptcy:

    • Individual files for bankruptcy when unable to repay.

    • Non-exempt assets are sold to cover debts.

  5. Involuntary Bankruptcy:

    • Court-ordered bankruptcy initiated by creditor petition.