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Business Ownership Comparison Worksheet

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Business Ownership Comparison Worksheet

Read the ownership guide and help three Australian business owners choose a suitable structure. Use evidence from the guide in your answers. Remember: the best structure depends on a business’s goals, size and risks.

Ownership guide

SOLE TRADER: One person owns and runs the business. The owner keeps the profits after costs and makes the decisions, but may have to use personal assets to pay business debts. This is called unlimited liability. PARTNERSHIP: Two or more people own a business together. Partners can share skills, work and profits. They also need to agree on decisions, and partners may be personally responsible for business debts. PROPRIETARY LIMITED COMPANY (Pty Ltd): A company is a separate legal entity from its owners. Its shareholders own shares, and directors manage or oversee the company. Owners generally have limited liability, so their personal assets are usually separate from company debts. Setting up and running a company involves more rules and costs. GOVERNMENT BUSINESS ENTERPRISE (GBE): A business owned by a government, such as a state or territory government. It may provide an important service as well as earn revenue. Its goals and decisions can be influenced by government policy and public needs. Key terms: ownership means who legally owns a business; profit is money left after costs; liability is responsibility for debts. Limited liability is not a guarantee against every personal loss—for example, a person may still be responsible for a personal guarantee they sign.

Structure

Who owns it?

Feature to consider

Sole trader

One person

Personal responsibility for business debts may be high

Partnership

Two or more people

Owners share work and need to agree on decisions

Pty Ltd company

Shareholders

Usually offers limited liability; more rules and costs

Government business enterprise

A state or territory government

May balance revenue with public service goals

Choose a structure

Meet the potential business owners: • Zach plans to sell handmade biscuits at weekend markets. She wants to start small, make decisions quickly and keep set-up simple. • Kai and Harper want to open a bicycle-repair shop together. They have different skills and want to share the work. • A group of investors plans to build a larger Australian food-packaging business. They expect to employ staff and want the owners’ personal assets generally separate from business debts.

1.Choose the most suitable starting structure for each person or group using the ownership guide. Write one structure for Zach, one for Kai and Harper, and one for the investors.

2.Which statement best describes a Pty Ltd company?

It is owned by one person, who always has unlimited liability.
It is a separate legal entity, and its shareholders generally have limited liability.
It is owned by a state or territory government.
It must be a partnership between two people.

3.Zach’s sole-trader biscuit business cannot pay a supplier. According to the guide, what could unlimited liability mean for Zach?

4.In a partnership, the owners can share skills and work, but they may need to agree on decisions.

TrueFalse

5.Kai and Harper choose a partnership. Give one advantage of this choice and one issue they should discuss before opening their shop.

6.Complete the sentence: A sole trader has owner, while a partnership has or more owners.

7.A state government owns a business that operates an important public transport service. Which ownership type from the guide could it be, and what is one goal it might balance with earning revenue?

8.A shareholder in a Pty Ltd company personally guarantees a business loan. The company later cannot repay it. Does the guide say the shareholder is definitely protected from every personal loss? Explain.

9.Zach wants quick, simple start-up decisions, but she is concerned about being personally responsible for debts. Recommend whether she should keep her sole-trader plan or investigate a Pty Ltd company. Give one reason for your recommendation and one trade-off to consider.