There are many different businesses out there in the big old world, from fast-food outlets to solicitors. The similarity that businesses can share even if there as complete opposite as a fast-food outlet to a solicitor is the way they have there legal structure. To create a successful business dependent on the type of work, four different legal structures can help succeed in what you desire. SOLE TRADER - A sole trader is the simplest legal business structure and consists of just one individual trader. This owner can control the business that how they please. Their desires toward the business are final and there working hours are chosen by the individual worker.
A sole trader basically means an individual does business in there name and they are the only owner of the business. This legal structure is not a corporation. Castle Hill Music is an example of a sole trader. There many not be the most successful business mostly due to the location. The have a wide range of instrument and music books. Unfortunately not large.
Advantages - There are many advantages in being a sole trader that could benefit your business if sole trader is your chosen legal business structure. o Sole traders has the simplest form of starting a business o The owner has complete control or how the business runs o It is less costly to operate o Owner keeps all profit o No tax on profits only personal income Disadvantages - Where there are advantages, disadvantages are also patiently waiting to strike. o Unlimited liability for business debts o Difficult to operate in illness o Carries all loses of the business o Needs to perform a variety of tasks o Difficulty in raising finance for expansion. PARTNERSHIP - A partnership for possible financial troubles is the safest option in establishing a business. This legal structure is shared between partners who own the business. They experience profit and loss of which the business has invested upon.
Partnerships are preferred over corporations for financial purposes. The decision decided are both consulted through the owners of the business before the idea is taken into consideration of the business. Lim's Hot Bread owned by Yen and Hay Lim is located at Eastwood. This business uses the partnership structure. Furthermore the business being a family business each owner has equal share to the profit that the business makes. Advantages - The advantages of partnership are more limited that a sole trader: o Shared responsibility and work load o Pooled funds and talent o Minimal government regulation o No taxes on business profits only on personal income o On illness of a partner business may continue as normal.
Disadvantages - The disadvantages are harder to cope with than the sole trader: o Unlimited liability o Liability for all debt including partners debt o Possibility of disputes o Difficult in finding a suitable partner for your business needs o Shared loyalty and authority PRIVATE COMPANY - The legal structure private company refers to the possession of a business in two different ways. The first conduct of the possession of the business is by non-governmental organisations. Secondly the possession of the company's financial investment. A business can be called a private company on the way the business is organised by the owners. A private company that has succeeded with this legal structure is Coles Supermarkets. This giant supermarket chain is owned privately by Wes farmers (renamed on 23 November 2007) Coles is currently the second largest share market.
Advantages - The advantages of having a private company are much vaster than the other legal business structures. o Experienced management o Growth potential o Easier to attract public finance o Perpetual success Disadvantages - The disadvantages of a private company follow as o Cost of formation o Public disclosure o Personal liability for business debts o Double taxation PUBLIC COMPANY - A public company refers to a business that is permitted to sell a completed product for the general public to purchase. A public company is usually a government owned corporation. This means that the government has established a business that produces profit towards the government. An example of a public company that is governmentally owned is Australia Post. Australia Post is Australian governmentally owned.
This means that profits that can made from Australia Post help the Australian economy. Australia Post is a very successful public company profiting with $4. 53 billion AUD in 2006. Advantages - Public company have different advantages to there legal structure than any other one. o Able to raise funds o Can easily raise funds o Public companies may issue their securities as compensation o Company tax rate lower than personal income Disadvantages - The disadvantages of choosing public company as your legal business structure is o Cost of formation o Must publish an annual report o Becomes to large resulting in inefficiencies.