Definitions
What is a Franchise
A business model where individuals can buy and operate a branch of an established company
True or False
Company owners are always responsible for paying business debts out of their own money.
False — company owners have limited liability.
What is a franchise?
a type of business where a person pays to use an existing business's name, logo, and systems.
True or False: Sole traders can hire employees
True
If a sole trader’s business goes into debt, they might have to sell their house to repay it. What type of liability is this?
Unlimited Liability
A legal structure that limits the personal liability of owners for business debts.
What does the term "separate legal entity" mean in relation to a company?
the company exists independently from its owners, so it can own assets, incur debt, and be sued in its own name
What is the name of a person who bought the franchise.
Franchisee
What kind of liability does a sole trader have?
unlimited liability
A private company protects its owners from losing personal belongings if the business fails. What type of liability is this?
limited liability
A legal structure where an owner may need to fund debts using personal assets.
Jasmin wants to start a clothing brand and protect her personal assets.Why should she choose to start a company
because it offers limited liability, protecting her personal assets.
Name one advantage of owning a Franchise
Lower Risk, Brand Recognition, Marketing Assistance, Training and Support, Established Business Model
sole trader’s business goes bankrupt. What could happen to their personal assets
they could be used to repay business debts due to unlimited liability
Which two business structures usually have unlimited liability?
Sole traders and partnerships
What is a Sole Trader and a Partnership
A business owned and operated by one person.
A business owned and operated by 2 or up to 20 people.
What is one key feature of a company?
A. It is always owned by one person
B. It has unlimited liability
C. It is a separate legal entity
D. It cannot employ workers
C. It is a separate legal entity
A friend says, “If I buy a franchise, I keep all the profits.” Is that true?
No, you must share profits or pay fees to the franchisor
what is an advantage of being a Sole Trader
Full Control of company, Keep profits, simple and low cost to start up, Privacy, Quick decision making, Close relation with the customers
Two friends start a business as a partnership. After a few years, the business collapses with $200,000 in debt. One partner disappears and can’t be found. Explain what the remaining partner is legally responsible for, and why.
he remaining partner may be responsible for the full $200,000 due to unlimited and joint and several liability, which means each partner can be held fully liable for all debts of the business
What is the difference between a Private Company and a Public Company
they are both large business owned by shareholders who share in profits but are not personally liable for debts.
But Public Companies have Shares are available on the Australian Stock Exchange (ASX) to the public
And Private companies Have Shares are only available to people known and approved by the existing shareholders.
Why might a business choose to remain a private company rather than going public?
To retain control, reduce public reporting pressure, and avoid shareholder interference
You buy a pizza franchise and want to add sushi. Can you? Why or why not?
No, because franchises must follow strict menu and brand rules?
MR L says, "Being a sole trader is the best business type because you have total freedom." Explain why this might not always be true.
total freedom comes with total responsibility and personal risk, including debt and stress
Amira and Leo start a private company offering cleaning services.
Amira invests $150,000, and Leo invests $150,000, owning 50% each.
The business fails and accumulates $1.5 million in debt.
Amira owns a house worth $800,000, and Leo owns a house worth $1.2 million.
How much of the $1.5 million debt is Leo personally responsible for?
150000
(Leo’s liability is limited to his investment in the company; his personal assets are protected.)