AOS2 Flashcards
(53 cards)
Internal Environment
The factors inside the business that impact on its day-to-day planning, activities and success.
External Environment
Consists of the factors outside the business that impact either directly (operating)
or indirectly (macro) on its day-to-day planning, activities and success.
Internal environmental factors
- Business structure
- Business model/strategy
- People (i.e. managers, employees)
- Resources (i.e. natural, physical, capital)
- Policies
- Business objectives
- Corporate culture
Operating environmental factors
*Customers
*Competitors
*Suppliers
*Creditors
*Interest groups
Macro environmental factors
*Social
*Legal/political
*Economic
*Environmental
*Technological
*International
Incorporation
A process that companies go through to become a seperate legal entity from the owner/s. This means the business can own assets, sue or be sued, and the owners have limited liability.
-company
-private&public
Unicorporation
A business that is not a separate legal entity from its owner. The owner is personally responsible for all debts and legal actions against the business which is unlimited liability.
-sole trader
-partnership
Sole trader
Type of business that is owned and operated by one individual
Sole trader advantages
-Low cost of entry to start
-Simplest form
-Less costly to operate
-no partner disputes
-keep all profits
-less government regulations
-no tax on profits(only personal income)
Sole trader disadvantages
-personal unlimited liability for business debts
-Business ends when owner dies
-hard to operate if unwell
-burden of management
-need wide variety of expertise
-difficulty in raising finance for expansion
Partnership
Form of business ownership that combines the expertise and resources of between 2-20 people.
Partnership advantages
-flexibility
-low start up costs
-less costly to operate than a company
-shared responsibility/workload
-no tax on business profits(only person al income)
-less government regulations
-pooled funds/talents
Partnership disadvntages
-personal unlimited liability
-possible disputes
-liability for all debts including partners even from the past
-difficulty in finding a suitable partner
-divided loyalty
Company
A company is an incorporated business structure that is a separate legal entity from its owners (shareholders), meaning it has limited liability.
Private limited company
Is san incorporated legal entity that has between up to 50 shareholders. It has limited liability and recognised by its name as it includes Pty.Ltd.
Private limited company advantages
-Limited liability
-Separate legal entity
-Can raise more capital than sole trader/partnership by selling shares
-Perpetual succession
-More credibility with banks and investors.
-Tax rate may be lower than personal income tax (especially for small businesses).
Private limited company disadvantages
-More complex and expensive to set up and run.
-More government regulation and reporting requirements.
-Profits are divided among shareholders (not kept by one person).
-Harder to change ownership compared to sole trader or partnership.
-Must follow rules under the Corporations Act.
Public listed company
Incorporated legal entity whose shares are freely traded on the Australian securities exchange(ASX) for any members of the public.
Unlimited shareholders, min 1 shareholder and 3 directors.
Required by law to publish audited financial accounts each year in an annual report
Public listed company advantages
Can raise large amounts of capital by selling shares on the stock exchange (e.g. ASX).
Limited liability for shareholders – personal assets are protected.
Separate legal entity – business is legally separate from owners.
Perpetual succession – company continues even if shareholders change.
More public awareness and status (can attract investors, customers, talent).
Public listed company disadvantages
Very complex and expensive to set up (must meet ASX listing rules).
High level of regulation and reporting requirements (e.g. annual reports, audits).
Loss of control – original owners may lose control as shares are sold to the public.
Profits must be shared among many shareholders (dividends).
Decisions can be slower due to board of directors and shareholder input.
Social enterprise
A business that exists to make a profit, but its main goal is to fulfil a social, environmental or community need.
Profits are usually reinvested into the business or the cause, rather than being distributed to owners or shareholders.
Social enterprise advantages
-Aims to make a positive impact on society or the environment.
-Attracts customers and supporters who value ethical practices.
-Can receive government grants and support.
-Employees and volunteers may be more motivated by the mission.
-Profits are reinvested to grow the social cause.
Social enterprise disadvantages
-Can struggle to raise capital – harder than companies selling shares.
-Often depends on grants, donations, or support to survive.
-May find it hard to balance financial goals with social goals.
-Limited profits for owners/investors (money goes to the mission).
-Complex compliance and auditing requirements
Government Business enterprise
A business owned and operated by the government, which provides goods or services to the public and aims to make a profit.
It is run like a corporation but is accountable to the government.
