VCE Business Management

Businesses in Australia are classed by who owns them, how they are set up in law and what they are for. The classes matter because they decide who controls the business, who carries the risk if it fails, how it can raise money and what it has to report to the public. The sections below take the types in turn, from the one-person business to the large listed company, and then look at the two kinds that are run for a wider purpose than private profit. ## Sole traders A **sole trader** is a business owned and run by one person. In law the owner and the business are the same person, so the owner receives all the profit and is personally responsible for all the debts. This is **unlimited liability**: if the business cannot pay what it owes, creditors can claim the owner's own savings, car and home. A sole trader is cheap and quick to set up, usually needing an Australian Business Number and any licences the trade requires. The owner makes every decision without consulting anyone, keeps all the profit, and can close the business easily. The drawbacks follow from the same facts. The business can raise money only from the owner's savings, a bank loan or credit, so growth is slow. One person has to cover every skill the business needs and cannot easily take a long break. The business also ends, in law, if the owner dies or retires, which is called limited continuity. A hairdresser working from a rented chair, a mobile electrician and a freelance graphic designer are typical…