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Business Structures Assignment PDF

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Added on  2021-06-17

Business Structures Assignment PDF

   Added on 2021-06-17

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Running Head: Business StructuresTypes of Business StructuresStudent NameInstitutional AffiliationCourse/NumberInstructor NameDue Date
Business Structures Assignment PDF_1
Business Structures2Types of Business StructuresIntroductionThere are four business structures in Australia, namely; Sole traders, Partnerships, Companies and Trusts. This classification is based on the composition and ownership structure and the legal structure. Each business structure has some unique features that distinguish it from the others as will be discussed below with advantages and disadvantages. This paper will determine the most appropriate business structure.Sole TradersA sole trader is the simplest form of business which is owned by a single person, who canenlist the services of his/her family in running it (Trakin, 2010). It does not have a separate existence from its owner, does not have perpetuity and the owner has unlimited liability (Smallbusinessbc.ca, 2016). This is to mean that in case of insolvency the owner’s assets can be seized to cuter for any of its outstanding debts if the business unable to.AdvantagesHe/she enjoys all the profit aloneFlexibleEasy to start, run and establish due to less legal formalitiesYour own boss. Enjoy full control over the business.Few tax reporting requirements as the only thing needed is his/her income returns.DisadvantagesLimited access to funds. Most of the capital used comes from savings, donations, friends and family.Prone to mismanagementProne to discontinuity because it lacks perpetuity.Suffers the loss alone, he/she is liable if the business goes bankrupt.Long hours of work.Restricted set of skills. The business may suffer due to the inability of the owner to enrollprofessionals in all its operations.
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Business Structures3Tax implicationThe sole trader uses his individual tax file number for his tax returns and pays the same tax rate as individual tax payers. However, if the trader has employees he is required to lodge payroll tax.PartnershipA partnership is a business owned by 8 to 20 people with an aim of making profits (Kappel, 2016). A partnership can be general/limited; in a general partnership, partners have a personal liability to the business while the others do not. The partners may choose to write up a partnership deed which amongst other things stipulates the profits and / loss sharing criteria or they may not. The partners contribute finances and jointly run the business. FeaturesIt does not have a separate legal entityPersonal liability. The partners may be called upon to use their assets to pay off outstanding debts in case of bankruptcy; this is according to partnership Act 12 of 1892.AdvantagesEasy to establish and run as compared to a company/ trust.In case of loss making, the partners share the burden as compared to the case of a sole trader.Greater set of skills, the different partners each have a set of unique skills which furtherboosts its effectiveness as compared to a sole trader (Fagel, 2012).Large capital/financial base as compared to sole trader.DisadvantagesPartners have a personal liability in the business.Partners have to share in the profit contrary to the sole trader.Just like the sole trader, partnerships lack perpetuity as the demise of a partner may lead to its dissolution (Freeman & Freeman, 2009).
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