Q1: Describe the following types of business structures:
• Sole trader
• Incorporated association
A sole trader is a business that is under the ownership and control of an individual and there is no separation between the owner and the business.
A partnership is the simplest form of a collective business structure that is only brought into existence when a commercial association exists between two individuals, a common business is carried out between the two individuals in question and the business is being carried out with a goal of making profits.
A company basically refers to an incorporated entity that has gone through a registration process via the ASIC and has fully complied with the Corporations act of 2001. A company is treated as a separate legal entity from its members.
A Trust refers to a relationship where an individual referred to as a trustee holds property on behave of another individual referred to as a beneficiary. This arrangement can be set up either for taxation purposes or for an individual who cannot legally hold ownership of the property in question.
A co-operative is a form of business entity which is owned and run by at least 5 members for their mutual gain or in some instances, for the benefit of the public. A co-operative is also a separate legal entity thus, can sue or be sued.
An incorporated association is an organization formed by two or more individuals for a common purpose whether it is for profit or not. An incorporated association enjoys the same benefits as those of a company but it is cheaper to set up. Unlike an unincorporated association, an incorporated association is regarded as a separate legal entity.
Q2: Outline 6 factors that business structure can determine.
The liability of the owner of the business.
The size of the business.
The businesses ability to perform trade operations regionally and internationally.
The regulations and legal compliances that the business will have to meet.
The business formation cost as well as the cost needed to run the business.
The future requirements of the business, capital wise.
Q3: Discuss 8 key elements of a sole trade business structure.
The business is owned and controlled by an individual.
Like any other business a sole trade may have employees.
The legal liability falls squarely on the owner of the business.
The business and the owner are one and the same.
The owner of the business is personally responsible for all the debts accrued by the business.
The owner can collect all the profits generated through the business as his or her personal income.
The owner of the business is not legally obligated to disclose the results of the business except for the tax obligations of the business.
Considering the fact that the ownership and control of the business rest on individual, it is often quite difficult to raise capital for the business