28 Jan What are the different types of business in Australia?
Being able to obtain funding for your business, such as a small business loan, help you make decisions for your company and develop strategies that help you stand out in a competitive market.
It can be quite a challenge of operating a new business, especially when aiming for customer growth in the current market.
Let’s explore the different business types that are part of the Australian market.
Business types in the market
A business that is created, owned and run by a single person is called a sole proprietorship business.
The running of a sole proprietorship means you have all the control of the business, including legal responsibilities:
- Loss; and
- Legal issues.
Given you aren’t required to adhere to any legal procedures or fill out forms to declare your business, a sole proprietorship business is easy to start.
Further to this, you don’t have to work alone, you are legally allowed to hire people to assist you with your business.
Working in Partnership
A business that doesn’t exceed 20 members and is owned and managed by more than two people is considered a partnership.
The responsibilities for this business structure, both legal and financial, are distributed to each member.
Registration of your business with the government is essential and is when you establish a business name.
Being in a partnership means you can combine skills and knowledge between you and your partners to establish the best practices and policies. Further to this, when establishing a business in partnership, the start-up costs are low and easy to establish. You’re also likely to have a greater capacity to borrow.
When referring to the term corporation, this type of business enables you to be a shareholder or investor with your stock. One of the biggest characterisations of this type of business is there are limited liabilities and your assets are protected from being claimed by creditors.
Corporations usually hire professionals to manage and run their business. Such a company’s life is generally unlimited because of the ability to pool resources from different people who become shareholders.
The potential negative impact of this is that you may have to endure double taxes – both corporate and individual. If sharing the risks, the decision is made generally by a majority rule.
Limited Liability Company
When you bring a partnership and corporation together, you get what is called a Limited Liability Company. This can be formed by an individual by drafting a written agreement.
The agreement must contain details of the company and information on how:
- Interest will be allocated;
- Management issues; and
- How profits and losses will be distributed.
Other requirements include:
- Draft an article of association;
- Backing the article up with certificates that are pertinent to the industry.
Forming this type of company is likely to see the acquisition of external financing.
Otherwise known as a business entity, a non-profit organisation is formed by individuals who want to gain profit through a common interest.
Most often, this type of business is formed for a social cause or one that benefits society.
An organisation that is non-profit is run under a “non-distribution constant” where surplus revenue is used to:
- Meet your mission;
- goals; and
This is instead of distributing profits to shareholders. To avoid taxation, you will need to apply for an exemption or be classified as a charity.
While possibly not as commonly known as the others, Studying competition helps you learn your business and make any necessary adjustments. This is designed to help you make business improvements and stand out in a competitive market.
This is the perfect opportunity for your knowledge to be broadened in regards to your target audience, which in turn will help you refine your business strategy as needed.
Part of this is taking the time to study your competitors so you can:
- Work out how they position themselves;
- Their strategies;
- Pricing; and
- Strengths and weaknesses.
What works for your business?
Being informed and knowing what works for your business, whatever type it is, can save a lot of resources and time that have been allocated for marketing.
When you establish what works for your business, it usually gives you an edge over your competitors because there is less of a requirement to spend time and resources than the competitors.
Gaining an understanding of what works for your business can be tracked through customer feedback and sales records. For this matter, it is always a good idea to consult a legal professional as well.
How can we help your business stand out?
While it’s challenging to start your business, significantly when raising capital, seeking the right assistance can help you go a long way.
For example, if you have a sole proprietorship, you must raise capital alone, which means there is the risk you may run out of cash.
There are options for seeking financial assistance to keep your business running smoothly and help you maintain it and move forward as you wish.
Further to this, better business decisions can be made to help you stay ahead of your competitors. Ask us how we can help you move forward and stay ahead.