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7 Cards in this Set
- Front
- Back
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What is a sole trader? |
A sole trader is an individual who controls & manages a business. - It is not a separate legal entity - Fully liable for all debts - Registration requires applying for ABN - Uses accounting software like MYOB |
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What are advantages of a sole trader? |
- Quick, inexpensive and easy to establish and wind down - Not subject to company regulation (not a disclosing entity) - Owner has total autonomy over business decisions - Owner claims all the profits of the business and all the after-tax gains |
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What are disadvantages of a sole trader? |
- Unlimited liability - bear full responsibility for business debts and legal actions - Limited by skill, time and investment of owner - Restrictive structure due to non-legal status of entity - Business will cease to exist if owner leaves, retires or dies |
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What is a partnership? |
An association between two or more persons who carry on a business as partners, and share profits or losses according to partnership agreement. - Enables sharing of ideas, skills and resources - Easy and cheap to establish - No seperate taxation payable, individual partner lodge personal income tax return with ATO - Some partnerships have a written agreement |
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What are advantages of a partnership? |
- Relatively easy & simple to set up - Informal business structure, not bound by accounting standards - Ability to share capital, skills, talents, knowledge and workload between two or more people |
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What are disadvantages of a partnership? |
- Unlimited liability for business debts and obligations by all partners - Limited life - if one partner dies or withdraws from the business then the partnership must dissolve - Mutual agency - each partner is seen as being an agent for the business - Disputes arising from profit sharing and decision making issues |
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What is a company? |
A business where the owners, shareholders are separated from the management of the business. - Independent legal entity (separate from the people who own, control and manage it) - Shareholders have limited liability - for the purchase price of their shares only - Unlimited life |
