Business Ownership Flashcards
(25 cards)
Three advantages of a sole trader?
Full control of business activity
Get all the profits
You are your own boss
What is a sole trader?
A business that is owned by one person and the sole proprietor provides all the capital necessary to operate and maintain the business
Three disadvantages of a sole trader?
Unlimited liability
Responsible for all decisions
Long hours
What is a partnership?
A business other than a company which is owned by two or more people max. 20 people. In professional partnerships the max is 400 people.
Three Advantages of partnership?
Ease of formation
Any losses are shared
Increased capital from more owners
Three Disadvantages of partnership?
Each partner has unlimited liability
Any profits made must be shared
Mutual liability
What is a company?
The capital of a company is divided into shares. People purchase the shares an become owners of the company otherwise known as shareholders
What are proprietary companies?
A company that cant raise money from the public
Must have at least 1 shareholder and a max.50 non-employee shareholders
Must have the word ‘pty.’ in its name
What are public companies?
Must have at least one shareholder
No max limit on number of shareholders
Can ask the public to invest money in the company
Must have ‘Ltd’ included in its name
Three advantages of proprietary company?
Continuous life
Relatively simple to establish
Limited liability to shareholders
Three advantages of public company?
Continuous life
Easy to transfer interest (sell shares)
Limited liability to shareholders
Three Company disadvantages?
More expensive to form
Subject to much greater regulation
Financial reports of a public or large proprietary company must be audited (extra expense)
What is the GST?
GST is a tax placed on goods and services.
The GST rate is 10% and a business must register for the GST if the turnover is over $75000 a year.
Business must also have an ABN once registered for GST
GST needs to be paid to ATO either half-yearly or quarterly
Three products with GST?
Clothes
Stationary
Cooked Meat
Three products without GST?
Fresh Meat
Fresh Produce
Milk
What is taxable supply?
Good and services which are taxed
What is a BAS?
Business Activity Statement
What are GST credits?
Every item bought by a company.
What is GST payable?
Every item sold by a company.
What is the definition of Assets?
A resource controlled by the entity as a result of a past transaction or event from which future economic benefits are expected to flow to the business.
What is the assets recognition criteria?
- Probable that future economic benefits will occur
2. The value of the asset can be measured reliably
What is the liabilities definition?
A liability is a present obligation to the entity arising from past events, which is expected to result in an outflow of future economic benefits
What is the recognition criteria of liabilities?
- Outflow of future economic benefits
2. Can be measured reliably
What is the definition of equity?
The value of the resources contributed to a business by the owner of that business
What the business owes the owner
