BSBSMB301

Investigate Micro Business Opportunities

Term 3, 2019
Week: 2
Element 1: Describe Business Ideas
Common types of business structures
Sole trader
Partnership
Company
Element 1: Describe Business Ideas
Sole Trader

This is a business run by one person,

although you may employ staff or engage
contractors
 Element 1: Describe Business Ideas
Sole Trader
Pros
Except for registering a business name
(optional), no initial costs associated with
starting up a business.
Owner has full control over the operation of
the business.
Easy to sell (depending on type of business)
or close down the business.
Low ongoing administration requirements
and costs.
As income from business and other sources
is combined in assessing taxation liability,
you also benefit from the tax free threshold
of $18,200.
No superannuation or insurance obligations
for yourself, keeping costs down
Cons
No separate legal status for the business; any
legal action against your business is taken
against you personally.
Wholly responsible for any debts incurred by
the business.
Income from all sources is totalled for tax
assessment purposes.
May be difficult to sell if it carries your name in
its business name; this is particularly important
where the business is built up through your
reputation
Element 1: Describe Business Ideas
Partnership
Partnership is the bringing together of
individuals, companies or a combination
of both for the operation of a business.
In a small business, it relates mainly to
individuals bringing their skills and/or
capital together to set up a business
 Element 1: Describe Business Ideas
Partnership
Pros Cons
Shared responsibility, taking the Dispute resolution could be involved and costly,
responsibility of operating the business out particularly if there is no Partnership
of the hands of one person. Agreement.
Considerable income tax benefits in a Decision making can be slower unless all
family partnership, provided each partner partners agree.
can demonstrate some input into the
business.
No superannuation or insurance obligations All partners fully responsible for debts of the
for the partners, keeping costs down. partnership, not just their share.
Low cost in setting up.
Cheap to administer.
Normally low costs in dissolving the
partnership.
Element 1: Describe Business Ideas
Company
A company is an independent legal entity
that can do business in its own name.
There is only one director required.
When you set up a company, you have
higher establishment costs and more
legislation to deal with.
Most small businesses incorporate as
proprietary limited companies.
 Element 1: Describe Business Ideas
Company
Pros
Limited liability – except in limited
circumstances, personal assets are not
at risk if the company fails.
Flat rate of income tax.
May present a more professional image.
Some businesses prefer to deal with
companies only.
Easier to sell the business as it can continue
in its own right.
The company will be sued for debts in its
own right and the amount of money
available to creditors will be limited to the
value of its assets, including equipment.
Cons
High starting costs, including company
registration, purchasing a company seal
and bank fees to set up a company bank
account.
Cause some conflict with your priorities.
Directors are required to act in the best interests
of the company, not themselves.
Higher standard of overall record
keeping/accountability
The loaning of company money to directors
may come under scrutiny from the ATO.
If this is the case, Pay as You Go (Withholding),
superannuation contributions and Work Cover
obligations will increase administration and
costs of operation.
Element 1: Describe Business Ideas
Products and services to match business
ideas
Location: Customers, Employees,
Suppliers
Home-based Business: Council
restrictions, Access to your customers,
Lifestyle, Occupational health and safety,
Tax implications
Virtual Business: Use of the internet
Element 1: Describe Business Ideas