WorksheetsTypes of Business Ownership
Total questions: 54
Worksheet time: 47mins
An individual who solely owns and operates a business.
(a)
A group or association with 2-20 people who run a business together with the aim of making a profit.
(a)
A business structure that has at least one shareholder and no more than 50 non-employee shareholders, where the liability of shareholders is limited to the value of shares.
(a)
A tax-exempt organisation formed for religious, charitable, literary, artistic, scientific, or education purposes.
(a)
A factor to consider is to minimise the (a) burden.
A factor to consider is sharing the business (a) .
A factor to consider is who is responsible for business debts, i.e. business (a)
A factor to consider is the future prospects of the business, i.e. business (a)
A factor to consider is the capital needed to start the business, i.e. ____ ____ ____
(a)
Factors to consider can be remembered as TOLSS. What do these letters stand for?
T___
O___
L___
S___
S___
(a)
What are some pros of starting up a business?
The business will be easy to start up.
All decision making is in the control of the owner.
The business owner is in charge of all potential income and can keep all the profit.
Flexibility to follow one's passion.
What are some cons of starting up a business?
Not a stable source of income and there can be no-one to fall back on if the business fails.
Can be hard to set up.
All liabilities fall to the business owner.
The business may grow slowly but steadily
What are some factors of the sole trader business type?
The business owner has unlimited liabilities, meaning anything of value that they own can be ceased if they become indebted.
The business will have to be registered for GST if income is over $75,000, which means clients will be charged 10% GST.
Profits are taxable at the owner's income - taxed at the owner's income tax rate.
Business does not have a separate legal identity to the owner.
What are the advantages of the sole trader business type?
Owner keeps all the profit and has the monopoly of control
Easy to set up and the work hours are flexible
More specialised and personal service
Raise capital by selling shares
What are the disadvantages of the sole trader business type?
Difficult to raise finances
Can't take advantage of the economies of scale
Unlimited liabilities
Lack of continuity
Partnerships are governed by the:
Partnership Protection Act of 1985
Partnership Act of 1895
Partnership Protection Act of 1895
Partnership Act of 1985
A ____ ____ ____ will be drawn up to set up a business relationship between partners.
(a)
Which of the following features are present in a Deed of Partnership?
the names, rights (decision making), investments (contribution), and voting rights of each partner
The tax rate of a partnership (personal income tax rate)
Rules for adding to or leaving the partnership
How profits are divided (even split or percentages)
What are some advantages of the partnership business structure?
Shared liability and split responsibility
More capital (money) brought into the business
Easy to set up
Partner can bring new or unique skills
What are some disadvantages of the partnership business type?
Split profit and decision making
A variety of passions and desires for the business that can be disagreed between parties
Capital is limited as only 20 contributors can join.
Unlimited liabilities
A ____ ____ partnership (LP) is made up of general partners whose liability is limited to the amount of money they have contributed to the partnership.
(a)
Limited partners are usually ____ investors who don't play any role in the day-to-day management of the business. ____ partner. (2 words)
(a)
(a) are very different to sole traders and partnership businesses.
Which of these business types have a separate legal identity?
Franchise
Partnership
Small Proprietary Limited (Pty Ltd)
Not-for-profit Organisation
What does ASIC stand for? What business type is registered with it?
Australian Security and Investing Conglomeration: Franchise
Australian Securities and Investment Cooperation: Franchise
Australian Security and Investing Committee: Small Proprietary Limited (Pty Ltd)
Australian Securities and Investment Commission: Small Proprietary Limited (Pty Ltd)
Small proprietary limited companies have at least ____ shareholders and are limited to ____.
(a)
In a proprietary limited company, shares are sold ____ to friends, family, etc, and receive ____ in return for their ____.
privately,
dividends,
investment
publicly,
out payments,
income
individually,
payments,
money
en block,
interest,
injection
Small proprietary limited company must have the letters ____ ____.
(a)
In a small proprietary limited company, shareholders have (a) liability.
The current company tax rate in Australia is:
(a)
The small business company tax rate is:
(a)
A small business has an income of less than:
(a)
The total ordinary income that a business drives in the income year (total sales or total takings):
(a)
Income that requires minimal labour to earn and maintain (income that makes itself i.e. investments):
(a)
To qualify as a 'Base Rate Entity' (25% on profits) a company must have:
Prove their status as a small proprietary limited company
a turnover of less than 50 million dollars
80% or less of income is passive
At least 10 shareholders
What are some advantages of the small proprietary limited business scheme?
Raise capital by selling shares, which can be done privately.
Death or terminal illness does not effect the business continuity.
Can be eligible for Government grants.
Shareholders have limited liability.
What are some disadvantages of the small proprietary limited business scheme?
Shares are limited as they cannot be sold on the share market.
Must have a certificate of incorporation, which is difficult and expensive, and operate within the Corporations Act.
Profits have to be shared by paying dividends, and the business owners are answerable to shareholders.
Expensive to set up and the business accounts are not kept private.
Any money earned by this business type has to be retained, and used for its own expenses, operations, programs, and resources.
(a)
An (a) not-for-profit organisation provides financial protection by limiting personal liability of members to the sum of their outstanding membership and subscriptions fees. (i.e. The Red Cross, Salvation Army)
An (a) not-for-profit organisation members would be liable for all debts and legal claims. (Pty Ltd)
What are some advantages of not-for-profit organisation business schemes?
Tax exemption and eligibility for Government grants.
Some (incorporated) have limited liabilities and is inexpensive to incorporate.
Few formalities and low compliance regulations.
Perceived by the public in a positive light.
What are some disadvantages of not-for-profit business schemes?
Not always productive or cost effective.
Not closely regulated or monitored so no clear guidelines for settling disputes.
Can be scrutinized by the public.
Sometimes will have to rely on fundraising and private donations if they do not generate enough revenue.
(Referring to the franchise business type) The (a) is the larger company - parent or umbrella company.
(Referring to the franchise business type) The (a) is the smaller company trading under the larger company's name or brand.
The franchisor allows the use of its business name for an agreed length of time and provides all the....
materials
training
financial support
advice
The franchisee must pay the following payments to the franchisor:
Bills
Starting costs
Initial start-up fee
Royalty payments (regular payments)
What are some advantages of the franchise business type?
Increased chance of success since the product is already known -easier to borrow money following on from that due to the past success of the business.
Few formalities and low compliance regulations.
All training and materials are supplied by the franchisor.
Get support from the franchisor, and problems that occur have most likely happened before.
What are some disadvantages of the franchise business type?
Limited creativity and flexibility.
Owner has very limited decision making, including supplies have to be bought from the franchisor which can be expensive.
The franchise cannot be sold without permission and the franchise may be taken away if the contract is breached.
Large initial fee, and further regular payments made to the franchisor.
All business structures must be set up in a legal sense...
so that they are registered.
so that they can pay tax.
so that they have bank accounts.
so they can be legally prosecuted.
TFN stands for:
(a)
ABN stands for:
(a)
GST stands for:
(a)
A business must register for GST if expected to earn over:
(a)
When deciding on a business format, the business owner needs to consider the following factors:
limiting the tax burden
sharing the business ownership
the liability of the business
the succession of the business
source of finance / capital
