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Identify and explain the various legal structures that a business can operate under in Australia.
- Sole proprietorship: a business that is
- owned by one person and there is no legal distinction between the business and
- the owner.
- Partnership: when 2 or more persons (up to
- 20) share the ownership and the risk of the business.
- Company (or corporation): is a business
- entity that has a separate legal identity from its owners.
- Trust: separate ownership of assets and the
- income or capital gain from these assets is not taxed until distributed to the
- beneficiaries. Separate legal entity.
An entrepreneur will often have a choice about the type of legal structure they establish for their business. What factors
should he/she take into account in determining which legal structure to adopt?
- Legal liability implications: can you afford
- to be help legally liable for the business?
- Tax implications: which structure will perform
- best in terms of tax rates?
- Costs involved: can you afford to set up
- your business as a particular structure?
- Comply with legal requirements: can your
- business legally operate under a certain structure?
That which most suits the entrepreneurs own situation and circumstances
Identify and explain the possible advantages of establishing a business as a company rather than establishing it as a sole proprietorship or partnership.
Advantages include limited liability easy transfer of ownership, perpetual existence, the rights of a natural human and a higher ability to raise capital.
Conversely, identify and explain the possible disadvantages of establishing a business as a company rather than establishing it as a sole proprietorship or partnership
- Advantages include lower start-up costs, sole
- ownership of profits and sole decision making abilities. They are easy to form, flexible and easy to discontinue.
What do you understand by ‘trade secrets’? Why is it important for a business to protect its trade secrets? How might a business protect its trade secrets?
- Trade secrets are any information that a business possesses that gives the business
- an advantage over competitors who do not have that information. Must have commercial value, not be known and must be reasonably protected from disclosure. Need to be protected to maintain competitive advantage. Can be protected via law or minimal disclosure of information, only a select group of people can access the information