Flashcards in UNIT 3 AOS 1 Deck (107)
Types of Businesses
- sole traders
- private limited companies
- public listed companies
- social enterprises
- government business enterprises
Define Sole Traders
A sole trader is a business structure owned and operated by the single proprietor with the aim of making a profit, and is entitled to keep profit after personal tax and expenses but has unlimited liability over the business
What are owners of a private limited company refereed as?
Owners of private limited companies own shares in the business are referred to as shareholders
What are the pros and cons of Sole Traders?
1. simplest and most cost-effective
2. owned and operated by a single person which reduces arguing over differing perspectives
3. unincorporated and therefore keeps all profit after personal tax and does not pay company tax.
1. owned and operated by a single person which can cause an overload of work for a single individual
2. unlimited liability for all business debts and may lose personal assets to pay off debt
Define Partnership Business
A partnership is a type of business owned by two to 20 owners who divide profits and responsibilities within the business.
What are the Pros and Cons of a Partnership
1. simple and cost-effective
2. Responsibilities and profits are shared between owners
1. Disputes can occur due to differing views and opinions
2. Partners are responsible for funding the business and have unlimited liability for all business debts.
3. Individual partners must also pay personal income tax on their share of the profits.
Define Private Limited company
is an incorporated business with at least one director and up to 50 selected shareholders. A private limited company is considered a separate legal entity to the owners.
Reasons for the popularity of Private limited companies
These companies are popular for expanding sole traders and partnerships while gaining protection from creating a separate legal entity and limiting their liability for debts incurred by businesses
What are some restrictions on Private limited companies?
1. Shareholders- the company has a minimum of two shares and is restricted to a maximum of 50 shareholders
2. Shares- can only be traded with the permission of other shareholders, which must be given before transaction takes place.
Small vs Large Private limited Companies
Small vs Large Private limited Companies
What are the pros and cons of a Private limited company
1. Larger private companies can have a board made up of different individuals that have different skills, experiences which can boost management capabilities and help growth.
2. shareholders have limited liability
3. separate legal entities
4 existence is not threatened by loss of director (has perpetuity)
1. higher degree of complexity
2. higher establishment cost
3. higher government control and reporting requirements
4. additional compliance costs
Define Public listed companies
is an incorporated business that can sell shares in an open market to an unlimited number of shareholders on the ASX (Australian Securties Exchange).
What are the pros and cons pf public listed companies?
1. Limited liability
2. Able to gain extra capital through selling extra shares
3. Separate legal entity
4. Existence is not threatened by death or removal of director or shareholder (has perpetuity)
1. Highly complex structure
2. High establishment costs
3. Needs more accountability and compliance paperwork
4. Additional compliance costs
Define Social enterprise
A type of business that uses strategies to maximize improvements in human well being or the environment. there two main goals are to achieve social, cultural, community or environmental outcomes and earn revenue. They are run like businesses but redirect surplus towards social or environmental goals
Define government business enterprises
is a profit-driven business that is owned by but managed separately from the government. GBE is accountable to the government and the public and has to fulfill a specific purpose outlined by the government while remaining profitable. This is often a large scale public service that aims to cater to essential public needs.
Define the business objective: Make a profit
Is a business objective where profit is essential for any business to survive and grow. By generating more revenue than expenses, a business earns a profit which can then be distributed to owners and
shareholders. Profits can also be reinvested into the business to grow the business.
Define the business objective: Increase market share
Market share is a business’s percentage of total sales within an industry. The business objective of increasing market share is typically to become more competitive within an industry to help increase profits and other objectives. To increase market share a business may encounter a loss such as reducing share price in order for long term gain such as acquiring new and loyal customers
Define the business objective: Meet shareholder expectations
Shareholders are people who have invested a sum of their own money into a business by purchasing company shares. As they are part owners of a business, shareholders expect a return on their investment. Therefore, shareholders either expect an income from the business in the form of dividends or they hope to sell their shares at a higher price in the future after the business has grown. By meeting these expectations the company can maintain shareholders, gain shareholders and develop a positive reputation for future shareholders.
Define the business objective: Fulfil market need and benefits
A business fulfills a market need by providing products and services which meet the desires of a group of customers with similar needs. By fulfilling a market need it can attract more sales and generate revenue from customers. As the customer needs are met a business can then develop a loyal customer base that generates consistent income and helps a business make a profit
Define the business objective: Fulfil social need and benefits
A business fulfills a social need by improving the community and environment through its business activities. Fulfilling a social need often improves businesses' reputations which can increase sales and therefore market share.
Additionally, as environmentally sustainable supplies usually last longer compared to unsustainable ones, a business can reduce how many supplies they use. Using fewer supplies can also increase a business's profit by reducing expenses in the long term.
are individuals or groups that have a vested interest in the performance and activities of a business.
Define Internal stakeholders
are groups who have a direct financial share or are employed by the business including owners, the board of directors, investors, shareholders, and employees.
Define External stakeholders
are groups that are outside the business but are concerned or affected by its activities including customers, suppliers and the general community
Owners/Shareholders as internal stakeholders, their role within the business and there a vested interest
Invest funds into a business where there invested interest is a return on there investments whether from profits, dividends or increase in share price, whilst creating and maintaining a positive impact on stakeholders.
Managers as internal stakeholders, their role within the business and there a vested interest
Coordinate employs and tasks to achieve business objectives where there invested interest is pay that matches the responsibility of managing a business, status, and recognition for work achievements, opportunities for career development.
Employees as internal stakeholders, their role within the business and there a vested interest
Complete business work tasks where there invested interest is fair pay and work expectations, opportunities for professional development and promotion and also long term job security
Customers as external stakeholders, their role and vested interest
Purchase and use a business's products or services with vested interest in receiving a product or service that is of quality and value for money
define vested interest
is a strong connection to a business that can lead to personal gain or benefit.
Suppliers as external stakeholders, their role and vested interest
Provide raw materials and resources with the invested interest in producing a profit through providing supplies and to maintain or increase revenue and establishing a long duration relationship with business.