VCE business management Unit 3 & 4 (notes) Questions and Answers ( Rated

VCE business management Unit 3 & 4 (notes) Questions and Answers ( Rated A) Sole trader - ANS- A sole trader is a business that is run and owned by one person. The sole owner provides all financing and is responsible for decision making. What are the advantages of being a sole trader? - ANS- Owner keeps all profits: All profits are kept and the owner doesn't have to share with partners Low cost of entry: It doesn't cost much, so a sole trade can operate right away e.g don't have to register Complete control of the business: owner has full control, is able to make decision based on owners terms for the business (milk bar) What are the disadvantages of being a sole trader? - ANS- THE BILITY Unlimited liability: the owner and business are the same and the owner is personally responsible for the business and it debts. Responsibility: all the responsibility for making day to day decisions is all on the hands of the owner( pressure) Inflexibility: because it is owned by one person, the owner is not allowed to have many days off because it could hurt the business (Milk bar) Partnership - ANS- A partnership is a business owned by a minimum of 2 people to a maximum of 20 partners. What are the advantages of being in a partnership? - ANS- Two people are better than one: There will be improved/ shared management with more than one owner (More skills, knowledge) and if an owner lacks in certain aspects then the other owner can make up for them. More flexibility: Being in a partnership allows for more days off ,for holidays. Partnerships are more flexible in terms of management, as long as all the partners can agree. Funds are all pooled together Low cost of entry: It doesn't cost much, so a partnership business can operate right away e.g don't have to register What are the disadvantages of being in a partnership? - ANS- Disputes: People will often have different ideas for how the business should be ran and this can lead to a dispute which could affect relationships. Profit sharing - Partners share profits Unlimited liability- the partners and the business are regarded as the same so if the business is in debt then the partners may have to be personally responsible for the business Liability for partner debts : If a partner is in debt then the other partner has to pay for those debts, even before the partnership has begun. (e.g hot wings) What are the legal steps required to incorporate a business? - ANS- A company name must be registered with ASIC, which will issue a certificate of incorporation and an Australian company number. ( Company becomes separate legal entity) What are the advantages of the company form of business ownership? - ANS- Efficient management -In company form , ownership is separate from management. It allows the company to appoint expert persons for managing different business functions. (Large resources attract people with high qualifications) Company has a long life - When a company is incorporated, it becomes a separate legal entity. It is an entity with perpetual succession. (Never ending owners following one after the other.) Limited liability - shareholders are not legally responsible for the debts of a company only the existing value of their shares. (Private company : Rip-curl) (Public Company = McDonald) What are the disadvantages of the company form of business ownership? - ANS- Financial affairs are public - Companies are required to publish an annual report of a financial inspection this mean its available for all the public to see Cost of formation: A lot of legal rules are required to be performed at the time of registration. Promotion of a company is both expensive and risky. Double taxation: since the company is now a separate legal entity, the business itself is taxed and you personally are taxed. (Private company : Rip-curl) (Public Company = McDonald) What are the key differences between a private and a public company - ANS- The size: a public company is a large business with more shareholders,employees ect. Private companies are a small to medium sized business with less.